gs_-16-_Monopoly_and_other_markets

gs_-16-_Monopoly_and_other_markets - ANNOUNCEMENTS (#1):...

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1 1/20/2010 Econ. 11 - Lecture #16 1 ANNOUNCEMENTS (#1): ± SCHEDULE OF EXAMS (Tentative): o TEST #1 –– DONE! o TEST #2 –Feb. 5 , 2010 o TEST #3 – first week March, 2010 (TBA). o FINAL EXAM – Announced during FINAL EXAM WEEK Lecture 16: MONOPOLY AND IMPERFECT COMPETITION ± Review: COST & SUPPLY in Competition ± Industry cost curves – decreasing, constant, and increasing ± Different market structures ± Introduction to monopoly and imperfect competition 1/20/2010 Econ. 11 - Lecture #16 3 Price 0 Quantity P 0 P=AR=MR= Demand IN PURE COMPETITION, THE FIRM TAKES THE PRICE DETERMINED IN THE MARKET. The Average Revenue (AR) does not change because the Price is the same at any level of output. The Marginal Revenue is also equal to the Price.
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2 1/20/2010 4 q 0 COST (=AC x Q 0 ) PROFIT MC, AC 0 Quantity GIVEN MARKET PRICE AT P 0 MC P 0 P=MR= Demand AC 0 AC THE FIRM PRODUCES q 0 1/20/2010 Econ. 11 - Lecture #16 5 q 0 PROFIT COST MC, AC 0 Quantity GIVEN MARKET PRICE AT P 0 MC AC 0 P 0 P=MR= Demand AC q- 10 If output is q -10, PROFIT IS SMALLER. MC < MR. Potential for more profits 1/20/2010 Econ. 11 - Lecture #16 6 PROFIT COST MC, AC 0 Quantity GIVEN MARKET PRICE AT P 0 MC AC 0 P 0 P=MR= Demand AC q +10 Additional Loss Producing at q +10 means that if Price is at P 0 , additional loss is incurred; MC>MR. q 0
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3 7 P, MC, AC, AVC 0 Quantity MC IS THE SUPPLY SCHEDULE! AC AVC MC Shut-down point Break-even point P 1 q 1 P 3 q 3 P 4 q 4 P 2 q 2 REVISED RULE: P=MR=MC FIRM IN PURE COMPETITION: ± THE DEMAND SCHEDULE FOR THE FIRM: ALL OUTPUT CAN BE SOLD AT THE INDUSTRY PRICE o This means the Price = Average Revenue = Marginal Revenue. ± THE SUPPLY SCHEDULE: MC SCHEDULE (from shutdown point ). ± FIRM IN EQUILIBRIUM: Demand is equal to Supply: o P (or P=AR=MR) = MC. LONG-RUN COST AND SUPPLY
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4 A sampling graph of the cost curves of all competing firms in the market The firms with equal average costs exhaust their optimum production first. When costs begin to rise and there is additional demand, then the high cost firms enter the market. Hence, the industry is a rising cost industry.
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5 1/20/2010 Econ. 11 - Lecture #16 13 INDUSTRY COST CURVES ± Long run cost curves indicate whether an industry becomes competitive or “monopolistic” (=one or few firms).
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This note was uploaded on 04/18/2010 for the course SE 67256 taught by Professor Dr.gerardosicat during the Spring '10 term at University of the Philippines Diliman.

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gs_-16-_Monopoly_and_other_markets - ANNOUNCEMENTS (#1):...

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