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Micro2_Chapter8 - School of Business International...

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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 1 School of Business International University Mar 2009
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 2 Introduction Time: 3 hrs Readings: – Keat & Young, Chapter 8 Content: – Competition and Market Types in Economic Analysis – Pricing and Output Decisions in Perfect Competition – Pricing and Output Decisions in Monopoly Markets – The Implications of Perfect Competition and Monopoly for Managerial Decision Making
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 3 Learning Objectives Describe the key characteristics of the four basic market types used in economic analysis. Compare and contrast the degree of price competition among the four market types. Provide specific actual examples of the four types of markets. Explain why the P=MC rule leads firms to the optimal level of production.
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 4 Learning Objectives Describe what happens in the long run in markets where firms that are either incurring economic losses or are making economic profits. Explain why this happens with particular attention to the key assumptions used in this analysis. Explain how and why the MR=MC rule helps a monopoly to determine the optimal level of price and output. Explain the relationship between the MR=MC rule and the P=MC rule.
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 5 Four Basic Market Types Perfect Competition (no market power) – Large number of relatively small buyers and sellers – Standardized product – Very easy market entry and exit – Nonprice competition not possible Monopoly (absolute market power subject to government regulation) – One firm, firm is the industry – Unique product or no close substitutes – Market entry and exit difficult or legally impossible – Nonprice competition not necessary
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References: Keat/Young, Managerial Economics, 5/e, Pearson Education Lecturer: Dr. Nguyen Quynh Mai 6 Four Basic Market Types Monopolistic Competition (market power based on product differentiation) – Large number of relatively small firms acting independently – Differentiated product – Market entry and exit relatively easy
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