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ch7-mecon - PERFECT COMPETITION Market Structure is...

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Market Structure is Important for Two Reasons It influences firm Behavior & Profitability It Influences Economic Performance Which Markets Perform Well Which should be Regulated We divide markets according to: Number of Competitors Barriers to Entry Types of Products Chapter 7 slide 1 Firms 1 Few Many Monopoly Oligopoly Perfect Competition Barriers to Entry High Medium None PERFECT COMPETITION
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Pairs of Shoes Price 0 4 8 12 16 Supply Demand BASICS OF SUPPLY & DEMAND The competitive equilibrium occurs at P = $25 and Q = 8 thousand shoes. $25 The increase (shift) in demand results in a higher price and a greater output. 7.2
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Pairs of Shoes Price 0 4 8 12 16 Supply Demand SUPPLY & DEMAND $25 The fall in the marginal cost of production causes a favorable shift in supply and a lower price accompanied by greater output. 7.3
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7.4 AC MC Output Revenue & Cost per unit P = $8 Each firm is a price taker (MR = P). Firm Behavior PERFECT COMPETITION Each firm sets its Q F such that P = MC.
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