Ch09 - Chapter 9 Perfect competition and monopoly: The...

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Chapter 9 Perfect competition and monopoly: The limiting cases of market structure David Begg, Stanley Fischer and Rudiger Dornbusch, Economics , 6th Edition, McGraw-Hill, 2000 Power Point presentation by Peter Smith
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9.2 Perfect competition many buyers and sellers so no individual believes that their own action can affect market price firms take price as given so face a horizontal demand curve the product is homogeneous perfect customer information free entry and exit of firms Characteristics of a perfectly competition market
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9.3 The supply curve under perfect competition (1) Above price P 3 (point C ), the firm makes profit above the opportunity cost of capital in the short run At price P 3 , (point C ), the firm makes NORMAL PROFITS P 1 £ Output SAVC SMC Q 1 SATC P 3 A C Q 3
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9.4 The supply curve under perfect competition (2) Between P 1 and P 3 , ( A and C ), the firm makes short-run losses, but remains in the market Below P 1 (the SHUT- DOWN PRICE), the firm fails to cover SAVC, and exits P 1 £ Output SAVC SMC Q 1 SATC P 3 A C Q 3
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The supply curve under perfect competition (3) So the SMC curve above SAVC represents the firm’s SHORT-RUN SUPPLY CURVE showing how much the firm would produce at each price level. P
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This note was uploaded on 11/22/2009 for the course HR GM600 taught by Professor Na during the Spring '09 term at Keller Graduate School of Management.

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Ch09 - Chapter 9 Perfect competition and monopoly: The...

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