Chapter 6 - Perfect Competition

Chapter 6 - Perfect Competition - $4 $6 $8 $10 $12 $14 $16...

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Chapter 6 Perfect Competition
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Large number of small firms Each firm a price taker Identical products Perfect information Free entry and exit What is Perfect Competition?
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Some industries are approximately perfectly competitive Economic Regulation of industries Why Study Perfect Competition
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 0 1 2 3 4 5 6 7 8 9 10 q MC P Rule #1: Produce where P = MC A P.C. Firm’s Output Decision
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 0 1 2 3 4 5 6 7 8 9 10 q MC Rule #2: MC must be upward sloping where P = MC P ? ?
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 0 1 2 3 4 5 6 7 8 9 10 q MC P TR = $24 × 8 = $192 FC = $56 & VC = $80 Π = $56
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 0 1 2 3 4 5 6 7 8 9 10 q MC P TR = $16 × 7 = $112 FC = $56 & VC = $56 Π = $0
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 0 1 2 3 4 5 6 7 8 9 10 q MC P TR = $10 × 6 = $60 FC = $56 & VC = $40 Π = $36
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$10 $6 $4 $4 $6 $10 $16 $24 $34 $0 $2
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Unformatted text preview: $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 1 2 3 4 5 6 7 8 9 10 q MC P TR = $6 5 = $30 FC = $56 & VC = $30 = $56 $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 1 2 3 4 5 6 7 8 9 10 q MC Rule #3: Firm will shut down when TR VC Firms Supply Function P = TR FC VC TR = FC + VC + TR VC = FC + VC = $80 PS = FC + = $56 + $56 = $112 d $6 $10 $16 $24 $34 $0 $2 $4 $6 $8 $10 $12 $14 $16 $18 $20 $22 $24 $26 $28 $30 $32 $34 $36 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 100,000 Q S Market Supply Function Assuming 10,000 Firms q 10,000 = Q Shut-Down Point is at Q = 0 Just to have easy graphs! Tiny Assumption Variable Cost Producer Surplus Change in Producer Surplus Variable Cost Producer Surplus Consumer Surplus S P D...
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This note was uploaded on 11/08/2010 for the course ECN ECN 001A taught by Professor Scottcarrell during the Spring '10 term at UC Davis.

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Chapter 6 - Perfect Competition - $4 $6 $8 $10 $12 $14 $16...

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