{[ promptMessage ]}

Bookmark it

{[ promptMessage ]}

L10Competition

# L10Competition - Introduction to Microeconomics Lecture 10...

This preview shows pages 1–9. Sign up to view the full content.

Introduction to Microeconomics Lecture 10 Perfect Competition, Monopoly and Price Discrimination Simon Cowan

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

View Full Document
Outline Perfect Competition Short-Run and Long-run Monopoly Price Discrimination
Perfect Competition A market situation in which no participant has significant power Large numbers of buyers and sellers Homogeneous product Perfect information Freedom of entry and exit in the long run

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

View Full Document
Short-run Equilibrium of the Firm -- Perfect competition The short-run here means (a) that the number of firms is fixed: there is no entry or exit and (b) some costs may be fixed in which case there is a difference between average variable cost (AVC) and average cost (AC) 1. Firms are price-takers horizontal demand curve MR = P (“marginal revenue = price”) 2. Firms are profit maximisers MR = MC (“marginal revenue = marginal cost”) 3. 1. and 2. imply that P = MC 4. For a unique solution to the maximisation problem we must assume that MC is upward-sloping (over some of its range)
SHORT-RUN EQUILIBRIUM OF THE FIRM P 1 P 2 P 3 q 1 q q 3 q 2 AC MC SUPER-NORMAL PROFIT LOSS P,C

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

View Full Document
SHORT-RUN SUPPLY CURVE OF THE FIRM P 1 P 2 P 3 q 1 q q 3 q 2 AC MC P,C AVC SRS SRS is the MC curve above AVC
Short-run Supply Curve of the Industry In the short run the number of firms is fixed Therefore the Industry SRS is simply the horizontal sum of all the current Firms’ SRS curves

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

View Full Document
MC AC D 2 D 1 SRS 1
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

### Page1 / 25

L10Competition - Introduction to Microeconomics Lecture 10...

This preview shows document pages 1 - 9. Sign up to view the full document.

View Full Document
Ask a homework question - tutors are online