ECN_203__6___Competitive Markets (f09)

ECN_203__6___Competitive Markets (f09) - Chapter 6...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 6 – Competitive Markets A market is competitive if there are: 1) Large amount of buyers and sellers in the market. As a result, buyers and sellers are “ price takers ” (must take P set by market) 2) Same quality of good across sellers. 3) No barriers to entry or exit. 4) Equal access to information.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Competitive Markets and Efficiency Unlike other market structures, a competitive market always achieves efficiency, where: 1. Ensures firms find & implement the most efficient ( lowest cost ) technique of production. 2. Rewards firms for finding innovative ways for efficiency ( temporarily!)
Background image of page 2
Competitive Markets and Efficiency 1. Eventually, a point will be reached where buyers are paying the lowest possible price while still covering the firm’s economic costs of producing. This gives firms just enough incentive to continue. “Magic of Markets” -- competitive markets always reach their most efficient point.
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Profit, Revenue and Cost of Competitive Firm Revenue Total Revenue: R from total sales TR= P x Q Marginal Revenue:
Background image of page 4
Image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 15

ECN_203__6___Competitive Markets (f09) - Chapter 6...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online