Lecture 12 - Perfect Competition (Students)

Lecture 12 - Perfect Competition (Students) - Lecture XII...

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Lecture XII Price Takers and Competition Chapter 9, pages 195-214
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Outline I. Introduction to Market Structure II. Characteristics of Perfect Competition III. Perfect Competition Graphically IV. Short Run Equilibrium - Profit Max V. The Shutdown Rule VI. The Firm’s Short Run Supply Curve VII. Long-Run Equilibrium in a Perfectly Competitive Market VIII. Permanent Changes in Market Demand
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I. Introduction to Market Structure Firm tries to select output level to maximize profit based on PRODUCTION COSTS DEMAND
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Discussion Why is a car dealer more likely to advertise than an egg farmer?
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Market Structure Number of Firms Geographic Market Elasticity for Product Number of Substitute Products Number of Consumers Nature of Product
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Firm Behavior Pricing Advertising Customer Treatment Efficiency Research and Development Patenting Merging
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Market Structure Perfect Monopolistic Oligopoly Pure Competition Competition Monopoly (Price Taker Markets) Ch.9 Ch. 10 Ch. 10 Ch. 11
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II. Characteristics of Perfect Competition All firms sell an identical (_homogenous ) product wheat farmers, film developing, dairy farmers So consumers are indifferent to different sellers Many sellers or firms Individual firm output is ________ relative to the total market output. (LRATC hits low point at relatively ______ level of output) These two points combine to make firms __________ Each firm can sell all of its output at the market price, but will sell nothing if they charge a higher price. Individual firms have no _____________ .
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Free entry and exit No barriers to prevent new entry or firm exit. Exclusive control of a resource Unusually high start up costs Instantaneous entry and exit II. Characteristics of Perfect Competition
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Firms maximize profits No firms operating charitably.
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Lecture 12 - Perfect Competition (Students) - Lecture XII...

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