Chapter_11

Chapter_11 - Chapter 11 PERFECT COMPETITION Todays lecture...

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PERFECT COMPETITION Chapter 11 Chapter 11
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Today’s lecture will: Discuss the six conditions for a perfectly competitive market. Explain why producing an output at which marginal cost equals price maximizes total profit for a perfect competitor. Demonstrate why the marginal cost curve is the supply curve for a perfectly competitive firm. Determine the output and profit of a perfect competitor graphically and numerically.
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A Perfectly Competitive Market A perfectly competitive market is a market with many buyers and sellers trading identical products so that each buyer and seller is a price taker.
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Conditions for Perfect Competition Both buyers and sellers are price takers. A price taker is a firm or individual who takes the market price as given. The number of firms is large . Large means that what one firm does has no bearing on what others do. Any one firm’s output is minuscule when compared with the total market.
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Conditions for Perfect Competition There are no barriers to entry. Barriers to entry are social, political, or economic impediments that prevent other firms from entering the market. Barriers to entry may be due to: Patents Technology Social forces, such as bankers lending only to certain people
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Conditions for Perfect Competition The firms’ products are identical , indistinguishable from any competitor’s product.
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Chapter_11 - Chapter 11 PERFECT COMPETITION Todays lecture...

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