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Chapter 8 - Chapter8 profitmaxcondition MR=MCatQ o...

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Chapter 8 10/7/10 2:09 PM profit max condition: MR= MC at Q* o Last unit produced MR = MC 1)  perfect competition   many sellers  identical products  no barriers to entry  o e.g. agricultural goods  2) Monopolistic competition  many sellers  different products  low/no barriers to entry  o e.g. restaurants, soap 3) Oligopoly  few sellers unique/ different products  barriers to entry  o e.g. computers, automobile 4)  Monopoly   1 seller  unique good  high barrier to entry  Perfect Competition (continued) many buyers/ sellers, no influence on price (Price takers)
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o Identical (homogeneous) goods  o No barriers to entry  See graphs 8.14 2 nd  graph is perfectly elastic  as a price taker the firm faces a perfectly elastic demand  curve at the market P  at perfectly elastic demand curve: there’s no  incentive to increase the price because no one  would buy it, and there’s no incentive to decrease  the price because people are already willing to buy  at the price 
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