Chapter 9 - Market Equilibrium and Market Demand: Imperfect...

Info iconThis preview shows pages 1–19. Sign up to view the full content.

View Full Document Right Arrow Icon
Market Equilibrium and Market Demand: Imperfect Competition Chapter 9
Background image of page 1

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

View Full DocumentRight Arrow Icon
Discussion Topics Market structure characteristics Monopolistic competition in selling Oligopolies in selling Monopolies in selling Implications for consumer and producer surplus
Background image of page 2
Market Structure Characteristics Number of firms and size distribution Product differentiation Barriers to entry Picture here tells a tale of two markets (no. 2 yellow corn vs. farm equipment) Pages 177-178
Background image of page 3

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

View Full DocumentRight Arrow Icon
Perfect Competition Up to now we have been assuming the firm and market reflect the conditions of perfect competition … farmers come close as anybody to meeting these conditions. A large number of small firms (2 million farms) A homogeneous product (no. 2 yellow corn) Freely mobile resources (no barriers to entry caused by patents, etc. or barriers to exit) Perfect knowledge of market conditions (quality outlook information from government and university sources)
Background image of page 4
Merging Demand and Supply Price Quantity D S P E Q E Chapters 6-7 Chapters 3-5 Chapter 8
Background image of page 5

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

View Full DocumentRight Arrow Icon
Firm is a “Price Taker” Under Perfect Competition Price Quantity D S P E Q E Price O MAX AVC MC The Market The Firm
Background image of page 6
If Demand Increases…… Price Quantity D S P E Q E Price AVC MC The Market The Firm 10 11 D 1
Background image of page 7

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

View Full DocumentRight Arrow Icon
If Demand Decreases…… Price Quantity D S P E Q E Price AVC MC The Market The Firm 9 10 D 2
Background image of page 8
Firm is a “Price Taker” in the Input Market Price Quantity D S P E Q E Price L MAX MVP MIC Labor Market The Firm
Background image of page 9

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

View Full DocumentRight Arrow Icon
Firm is a “Price Taker” in the Input Market Price Quantity D S P E Q E Price L MAX MVP MIC The Firm Fertilizer Market
Background image of page 10
Imperfect Competition Many of the markets in which farmers buy inputs and sell their products however do not meet these conditions This chapter initially focuses on specific types of imperfect competitors in the farm input market, where firms are capable of setting the prices farmers must pay for specific inputs to their production.
Background image of page 11

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

View Full DocumentRight Arrow Icon
Imperfect Competition in Selling
Background image of page 12
Unlike perfect competitors who face a perfectly elastic demand curve, imperfect competitors selling a differentiated product benefit from a downward sloping demand Curve (see Table 9.1 for both curves) (see Table 9.1 for both curves) Page 182
Background image of page 13

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

View Full DocumentRight Arrow Icon
Page 182 See table 11.1 on page 237 The marginal revenue in this instance is also downward sloping, and goes to zero at the point where total revenue peaks. Beyond this point, revenue falls as price falls.
Background image of page 14
Types of Imperfect Competitors in Input Markets 1. Monopolistic competition 2. Oligopoly 3. Monopoly Let’s start here…
Background image of page 15

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

View Full DocumentRight Arrow Icon
Monopolistic Competitors Many sellers Ability to differentiate product by advertising and sales promotions Profits can exist in the short run, but others bid them away in the long run Equate MC with MR, but price off the downward sloping demand curve Page 181-184
Background image of page 16
Short run profits . The firm produces Q SR where MR=MC at E above, but prices its products at Page 183
Background image of page 17

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

View Full DocumentRight Arrow Icon
Short run loss . The firm suffers a loss in the current period following the same strategy of operating at Q SR given by MC=MR at point E.
Background image of page 18
Image of page 19
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 71

Chapter 9 - Market Equilibrium and Market Demand: Imperfect...

This preview shows document pages 1 - 19. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online