ECON20023 T1 2008 Lecture 5

ECON20023 T1 2008 Lecture 5 - ECON20023 ECONOMICS FOR...

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Based on slides from Layton et al ( 1 ECON20023 ECONOMICS FOR BUSINESS T1 2008 LECTURE 5 Galina Ivanova, CQU
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Based on slides from Layton et al ( 2 Key concepts What is perfect competition? Why is the perfectly competitive firm a price taker? What determines the firm’s profit maximising output? What is the shut down rule? What is normal profit? What determines long-run equilibrium? What are the possible characteristics of long-run supply curves?
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Based on slides from Layton et al ( 3 Market structure Market structure is a classification system for the key traits of a market, including the number of firms, the similarity of the products they sell, and the ease of entry into and exit from the market. This chapter explains how competitive markets determine prices, output and profits.
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Based on slides from Layton et al ( 4 Perfect competition A market structure which features: A large number of small firms Act independently Small share of output Can not affect the market price A homogeneous (identical) product Product can not be distinguished among different sellers Buyers are indifferent to which sellers’s product they buy Very easy entry into or exit from the market Financial, technical or legal barriers to entry or exit
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Based on slides from Layton et al ( 5 Is this a ‘real-world’ market? No real-world market exactly fits these assumptions. The perfectly competitive market is a theoretical or ideal model. The point of having such a model is that it creates a benchmark against which real-world markets can be compared. Perfectly competitive markets deliver maximum efficiency.
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6 Promoting competition and fair trading The Australian Competition and Consumer Commission (ACCC) promotes competition, fair trade and consumer protection in Australia. Government policies are often developed
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ECON20023 T1 2008 Lecture 5 - ECON20023 ECONOMICS FOR...

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