8. Perfect Competition

8. Perfect Competition - Principles of Microeconomics Shomu...

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Unformatted text preview: Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 8. Perfect competition Perfect Competition A1 There are a large number of consumers A2 There are a large number of producers A3 All producers produce the same good without any quality variation A4 Best technology is well-known; no patents A5 There is perfect information A6 There is free entry and exit Marginal revenue ($/ton) MR P = 10 q (tons) 1 2 3 4 5 6 7 8 9 10 11 12 13 Firms are price-takers! Firms are price-takers! Marginal cost q (tons) ($/ton) 2 4 6 8 12 14 16 18 MC 10 1 2 3 4 5 6 7 8 9 10 11 12 13 Marginal decision-making q (tons) ($/ton) P = 10 2 4 6 8 12 14 16 18 1 2 3 4 5 6 7 8 9 10 11 12 13 MR MC Marginal losses and gains ($/ton) P = 10 2 4 6 8 12 14 16 18 MR q (tons) 1 2 3 4 5 6 7 8 9 10 11 12 13 Losses Losses Gains Gains Rules 1 and 2 Produce where P = MC Produce where MC is rising (tons) ($/ton) MC q 1 q 2 MR Shutdown decision in the short run Ex.: TR = $1200, TVC = $1300,...
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8. Perfect Competition - Principles of Microeconomics Shomu...

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