Market structures 1.Perfect Competition 2. Monopoly 3. Oligopoly 4. Monopolistic Competition
<ul><li>Determinants of market structure </li></ul><ul><ul><li>Number of sellers </li></ul></ul><ul><ul><li>Nature of the ...
<ul><li>Types of profit  : </li></ul><ul><li>Economic profit  is Total Revenue less explicit and implicit costs. </li></ul...
Features of the four market structures
<ul><li>Perfect Competition: </li></ul><ul><ul><li>Free entry and exit to industry </li></ul></ul><ul><ul><li>Homogenous p...
Short Run Equilibrium <ul><li>Since the firm is a price taker, he can sell any quantity at the given price. </li></ul><ul>...
Perfect Competition <ul><li>Short-run equilibrium of the firm </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><ul><li>g...
Short-run equilibrium of industry and firm under perfect competition fig O £ (b)  Firm Q  (thousands) O (a)  Industry P Q ...
Short-run shut-down point fig O O (a)  Industry P Rs Q  (millions) S (b)  Firm MC AC Q  (thousands) D 2 P 2 AR 2 D 2  = AR...
Long-run equilibrium under perfect competition fig O O P £ Q  (millions) Q L Q  (thousands) New firms enter Supernormal pr...
Perfect Competition <ul><li>The long run </li></ul><ul><ul><li>long-run equilibrium of the firm </li></ul></ul><ul><ul><ul...
Long-run equilibrium of the firm under perfect competition Rs  Q  O (SR)AC  (SR)MC  LRAC  AR = MR D L LRAC  =  (SR)AC  =  ...
Perfect Competition <ul><li>The long run </li></ul><ul><ul><li>long-run equilibrium of the firm </li></ul></ul><ul><ul><ul...
Upcoming SlideShare
Loading in …5
×

Market structures1

1,624
-1

Published on

Published in: Business, Technology
0 Comments
2 Likes
Statistics
Notes
  • Be the first to comment

No Downloads
Views
Total Views
1,624
On Slideshare
0
From Embeds
0
Number of Embeds
1
Actions
Shares
0
Downloads
84
Comments
0
Likes
2
Embeds 0
No embeds

No notes for slide
  • 4
  • 5
  • 5
  • Market structures1

    1. 1. Market structures 1.Perfect Competition 2. Monopoly 3. Oligopoly 4. Monopolistic Competition
    2. 2. <ul><li>Determinants of market structure </li></ul><ul><ul><li>Number of sellers </li></ul></ul><ul><ul><li>Nature of the product – homogenous (identical), differentiated? </li></ul></ul><ul><ul><li>Freedom of entry and exit </li></ul></ul><ul><ul><li>Control over price </li></ul></ul><ul><ul><li>Non price Competition </li></ul></ul>
    3. 3. <ul><li>Types of profit : </li></ul><ul><li>Economic profit is Total Revenue less explicit and implicit costs. </li></ul><ul><li>Accounting profit is total revenue less explicit costs </li></ul><ul><li>Normal profit is an implicit cost which the opportunity cost for the entrepreneur – the return that he could have earned in the next best alternative. </li></ul>
    4. 4. Features of the four market structures
    5. 5. <ul><li>Perfect Competition: </li></ul><ul><ul><li>Free entry and exit to industry </li></ul></ul><ul><ul><li>Homogenous product – identical - no consumer preference </li></ul></ul><ul><ul><li>Large number of buyers and sellers – no individual seller can influence price </li></ul></ul><ul><ul><li>Sellers are price takers – have to accept the market price </li></ul></ul><ul><ul><li>Perfect information available to buyers and sellers </li></ul></ul>
    6. 6. Short Run Equilibrium <ul><li>Since the firm is a price taker, he can sell any quantity at the given price. </li></ul><ul><li>This implies that his marginal revenue curve is horizontal </li></ul><ul><li>MR = Price </li></ul>
    7. 7. Perfect Competition <ul><li>Short-run equilibrium of the firm </li></ul><ul><ul><li>Price </li></ul></ul><ul><ul><ul><li>given by market demand and supply </li></ul></ul></ul><ul><ul><li>Output </li></ul></ul><ul><ul><ul><li>where P = MC </li></ul></ul></ul><ul><ul><li>Profit= revenue - cost </li></ul></ul><ul><ul><ul><li>possible supernormal profits </li></ul></ul></ul>
    8. 8. Short-run equilibrium of industry and firm under perfect competition fig O £ (b) Firm Q (thousands) O (a) Industry P Q (millions) Q e S D P e MC AR D = AR = MR AC AC
    9. 9. Short-run shut-down point fig O O (a) Industry P Rs Q (millions) S (b) Firm MC AC Q (thousands) D 2 P 2 AR 2 D 2 = AR 2 = MR 2 AVC
    10. 10. Long-run equilibrium under perfect competition fig O O P £ Q (millions) Q L Q (thousands) New firms enter Supernormal profits Profits return to normal (a) Industry (b) Firm S 1 D LRAC P L P 1 S e AR 1 D 1 AR L D L
    11. 11. Perfect Competition <ul><li>The long run </li></ul><ul><ul><li>long-run equilibrium of the firm </li></ul></ul><ul><ul><ul><li>all supernormal profits competed away </li></ul></ul></ul><ul><ul><ul><li>LRAC = AC = MC = MR = AR </li></ul></ul></ul>
    12. 12. Long-run equilibrium of the firm under perfect competition Rs Q O (SR)AC (SR)MC LRAC AR = MR D L LRAC = (SR)AC = (SR)MC = MR = AR
    13. 13. Perfect Competition <ul><li>The long run </li></ul><ul><ul><li>long-run equilibrium of the firm </li></ul></ul><ul><ul><ul><li>all supernormal profits competed away </li></ul></ul></ul><ul><ul><ul><li>LRAC = AC = MC = MR = AR </li></ul></ul></ul><ul><ul><li>long-run industry supply curve </li></ul></ul><ul><ul><li>incompatibility of economies of scale with perfect competition </li></ul></ul><ul><li>Does the firm benefit from operating under perfect competition? </li></ul>
    1. A particular slide catching your eye?

      Clipping is a handy way to collect important slides you want to go back to later.

    ×