MADW-CH10-SN

MADW-CH10-SN - Chapter 10 - Perfect Competition ECP 5705...

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ECP 5705 Chapter 10 Slide 1 Chapter 10 -- Perfect Competition
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ECP 5705 Chapter 10 Slide 2 Objectives and Readings Market structure Price determination under perfect competition Shifts in supply and demand curves Output decision of a perfectly competitive firm Short-run equilibrium Long-run equilibrium Long-run adjustment process A constant-cost industry An increasing-cost industry Resource allocation in a perfectly competitive economy Reading material: Pages 377-402 Not responsible for the following sections Producer surplus in the short-run (pp 391-394)
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ECP 5705 Chapter 10 Slide 3 Market Structure Every firm has to decide how much to produce and sell and what price to charge. This decision depends on market-structure considerations. The market consists of buyers and sellers who can communicate with one another. Economists classify market structures into four broad categories: Perfect competition Monopoly Monopolistic competition Oligopoly
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ECP 5705 Chapter 10 Slide 4 Perfect competition Many sellers, so many that firms are price takers Homogeneous product Small degree of scale economies Easy entry and exit Examples of perfectly competitive markers: The stock market Many agricultural products How are the price and quantity determined in a perfectly competitive market?
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ECP 5705 Chapter 10 Slide 5 Monopoly There is only one producer. The product is unique. Barriers of entry very high legal barriers of entry scale economies Examples of monopolies are public utilities, cable TV companies, etc. Frequently monopolies are regulated by the government.
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ECP 5705 Chapter 10 Slide 6 Monopolistic competition Many producers Differentiated products Each firm has some monopoly power over its price Each firm faces low barriers to entry Low degree of scale economies Low level of minimum efficient scale Non price competition takes the form of advertising
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This note was uploaded on 04/30/2009 for the course ECON 301 taught by Professor Daher during the Spring '08 term at UVA.

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MADW-CH10-SN - Chapter 10 - Perfect Competition ECP 5705...

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