Deck 11 - Econ 301 Microeconomics L lick to edit Master...

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Click to edit Master subtitle style 5/11/11 Lecture 11. Perfectly Competitive Markets Professor Mian Dai Winter, 2011 Econ 301 Microeconomics
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5/11/11 Outline What is perfect competitive market? What is profit maximization quantity? What is long run and short run supply curve for a competitive firm? How is long run market equilibrium determined?
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5/11/11 The market for rose Nakao Growers is one of the largest rose growers in the US. Established in 1948 in Pomona CA, by two Japanese-American brothers. Largest among 250, but produce less than 5% of rose in US. Nakao is so small and its production decision has no impact on market price of rose. Key decision for company: how many rose to grow (not how much to charge, the company take market price as given) Why study perfect competition?
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5/11/11 What is perfectly competitive 1. Fragmented industry (i.e. many buyer and seller) Output of each seller is too small to impact market price or input prices. Implies that seller and buyer are price takers. 2. Produce undifferentiated products All products are perceived identical by consumers. 3. Consumer have perfect information
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5/11/11 Review: Profit maximization, Any profit maximization firm will produce a Q that makes MR=MC When MC>MR, firm can always increase profit by decreasing output When MC<MR, firm can always increase
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Deck 11 - Econ 301 Microeconomics L lick to edit Master...

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