Pure
Competitio
n
23C H A P T E R
Market Structure Continuum
FOUR MARKET MODELS
Pure Competition
Market Structure Continuum
Pure
Competition
FOUR MARKET MODELS
Imperfect Competition
All Markets that are
Not Purely Compe...
Market Structure Continuum
Pure
Competition
FOUR MARKET MODELS
Pure Monopoly
Market Structure Continuum
Pure
Competition
Pure
Monopoly
FOUR MARKET MODELS
Monopolistic Competition
Market Structure Continuum
Pure
Competition
Pure
Monopoly
Monopolistic
Competition
FOUR MARKET MODELS
Oligopoly
Market Structure Continuum
Pure
Competition
Pure
Monopoly
Monopolistic
Competition Oligopoly
FOUR MARKET MODELS
Pure Compe...
DEMAND AS SEEN BY A
PURELY COMPETITIVE SELLER
Perfectly Elastic Demand
Price Taker Role
For example...
$131 0 $ 0
Product Price (P)
(Average Revenue)
Total
Revenue (TR)
Marginal
Revenue (MR)
Quantity
Demanded (Q)
DEMAND AS SE...
$131
131
0
1
$ 0
131
$131
Product Price (P)
(Average Revenue)
Total
Revenue (TR)
Marginal
Revenue (MR)
Quantity
Demanded (...
$131
131
131
0
1
2
$ 0
131
262
$131
131
Product Price (P)
(Average Revenue)
Total
Revenue (TR)
Marginal
Revenue (MR)
Quant...
$131
131
131
131
0
1
2
3
$ 0
131
262
393
$131
131
131
Product Price (P)
(Average Revenue)
Total
Revenue (TR)
Marginal
Reve...
$131
131
131
131
131
0
1
2
3
4
$ 0
131
262
393
524
$131
131
131
131
Product Price (P)
(Average Revenue)
Total
Revenue (TR)...
$131
131
131
131
131
131
131
131
131
131
131
0
1
2
3
4
5
6
7
8
9
10
$ 0
131
262
393
524
655
786
917
1048
1179
1310
$131
13...
$131
131
131
131
131
131
131
131
131
131
131
0
1
2
3
4
5
6
7
8
9
10
$ 0
131
262
393
524
655
786
917
1048
1179
1310
$131
13...
DEMAND, MARGINAL REVENUE, AND TOTAL
REVENUE IN PURE COMPETITION
TR
D = MR
1 2 3 4 5 6 7 8 9 10
1179
1048
917
786
655
524
3...
SHORT-RUN PROFIT MAXIMIZATION
Two Approaches...
First:
Total-Revenue -Total Cost Approach
The Decision Rule:
Produce in th...
SHORT-RUN PROFIT MAXIMIZATION
Two Approaches...
First:
Total-Revenue -Total Cost Approach
The Decision Rule:
Produce in th...
Total
Cost
0
1
2
3
4
5
6
7
8
9
10
Total
Product
Total
Fixed
Cost
Total
Variable
Cost
Total
Revenue Profit
$ 100
100
100
10...
Total
Cost
0
1
2
3
4
5
6
7
8
9
10
Total
Product
Total
Fixed
Cost
Total
Variable
Cost
Total
Revenue Profit
$ 100
100
100
10...
$1,800
1,700
1,600
1,500
1,400
1,300
1,200
1,100
1,000
900
800
700
600
500
400
300
200
100
0
Totalrevenueandtotalcost
Tota...
SHORT-RUN PROFIT MAXIMIZATION
Two Approaches...
First:
Total-Revenue -Total Cost Approach
Three Characteristics of MR=MC R...
Average
Total
Cost
0
1
2
3
4
5
6
7
8
9
10
Total
Product
Average
Fixed
Cost
Average
Variable
Cost
Price =
Marginal
Revenue
...
Average
Total
Cost
0
1
2
3
4
5
6
7
8
9
10
Total
Product
Average
Fixed
Cost
Average
Variable
Cost
Price =
Marginal
Revenue
...
$200
150
100
50
0
CostandRevenue
1 2 3 4 5 6 7 8 9 10
MC
MR
AVC
ATC
Economic Profit
$131.00
$97.78
MARGINAL REVENUE-MARGIN...
$200
150
100
50
0
CostandRevenue
1 2 3 4 5 6 7 8 9 10
MC
MR
AVC
ATC
Economic Profit
$131.00
$97.78
MARGINAL REVENUE-MARGIN...
the MR=MC rule still applies
If the price is lowered
from $131 to $81…
…but the MR = MC point
changes.
MARGINAL REVENUE-MA...
$200
150
100
50
0
CostandRevenue
1 2 3 4 5 6 7 8 9 10
MC
MR
AVC
ATC
Economic Loss
$81.00
$91.67
MARGINAL REVENUE-MARGINAL ...
$200
150
100
50
0
CostandRevenue
1 2 3 4 5 6 7 8 9 10
MC
MR
AVC
ATC
$71.00
MARGINAL REVENUE-MARGINAL COST APPROACH
Short-R...
MARGINAL REVENUE-MARGINAL COST APPROACH
Marginal Cost & Short-Run Supply
Price
Quantity
Supplied
Maximum Profit (+)
Or Min...
CostandRevenue,(dollars)
MC
MR1
AVC
ATC
MARGINAL REVENUE-MARGINAL COST APPROACH
Quantity Supplied
MR2
MR3
MR4
MR5
P1
P2
P3...
CostandRevenue,(dollars)
MC
MR1
MARGINAL REVENUE-MARGINAL COST APPROACH
Quantity Supplied
MR2
MR3
MR4
MR5
P1
P2
P3
P4
P5
Q...
MARGINAL REVENUE-MARGINAL COST APPROACH
Marginal Cost & Short-Run Supply
AVC2
MC2
Higher Costs Move the
Supply Curve to th...
MARGINAL REVENUE-MARGINAL COST APPROACH
Marginal Cost & Short-Run Supply
AVC2
MC2
Lower Costs Move
the Supply Curve
to the...
P
Q
S=MC
AVC
ATC
8
D
P
Q8000
D
S= MCs
IndustryFirm
(price taker)
Economic
Profit
$111$111
SHORT-RUN COMPETITIVE EQUILIBR...
P
Q
S=MC
AVC
ATC
8
D
P
Q8000
D
S= MCs
IndustryFirm
(price taker)
Economic
Profit
$111$111
SHORT-RUN COMPETITIVE EQUILIBR...
PROFIT MAXIMIZATION IN THE LONG RUN
Assumptions...
• Entry and Exit Only
• Identical Costs
• Constant-Cost Industry
Goal o...
Temporary profits and the reestablishment
of long-run equilibrium
S1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(price taker)
$...
An increase in demand increases profits…
MR
D1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(price taker)
$60
50
40
$60
50
40
PRO...
New competitors increase supply, and lower
prices decrease economic profits.
MR
D1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(...
Decreases in demand, losses, and the
reestablishment of long-run equilibrium
S1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(pri...
A decrease in demand creates losses…
MR
D1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(price taker)
$60
50
40
$60
50
40
PROFIT ...
MR
D1
MC
ATC
P
Q100
P
Q100,000
IndustryFirm
(price taker)
$60
50
40
$60
50
40
PROFIT MAXIMIZATION IN THE LONG RUN
D2
Retur...
LONG-RUN SUPPLY IN A
CONSTANT COST INDUSTRY
Constant Cost Industry
Perfectly Elastic
Long-Run Supply
Graphically...
P
Q
=$50 S
D1
Z1
Q1
D2
Z2
Q2Q3
D3
Z3
100,000 110,00090,000
LONG-RUN SUPPLY IN A
CONSTANT COST INDUSTRY
P1
P2
P3
P
Q
=$50 S
D1
Z1
Q1
D2
Z2
Q2Q3
D3
Z3
100,000 110,00090,000
LONG-RUN SUPPLY IN A
CONSTANT COST INDUSTRY
P1
P2
P3
How does a...
P
Q
$55
50
45
S
D1
Y1
Q1
D2
Y2
Q2Q3
D3
Y3
100,000 110,00090,000
LONG-RUN SUPPLY IN AN
INCREASING COST INDUSTRY
P1
P2
P3
P
Q
$55
50
45
S
D1
Y1
Q1
D2
Y2
Q2Q3
D3
Y3
100,000 110,00090,000
P1
P2
P3
How does a
decreasing cost
industry differ?
LONG-...
P
Q
$55
50
45
S
D1
Y1
Q1
D2
Y2
Q2Q3
D3
Y3
100,000 110,00090,000
P1
P2
P3
What is the long-
run competitive
equilibrium?
LO...
P MR
Q
MC
ATC
Quantity
Price
Price = MC = Minimum ATC
(normal profit)
LONG-RUN EQUILIBRIUM
FOR A COMPETITIVE FIRM
PURE COMPETITION AND EFFICIENCY
Productive Efficiency
Price = Minimum ATC
Allocative Efficiency
Price = MC
Underallocation...
PURE COMPETITION AND EFFICIENCY
Productive Efficiency
Price = Minimum ATC
Allocative Efficiency
Price = MC
Underallocation...
PURE COMPETITION AND EFFICIENCY
Productive Efficiency
Price = Minimum ATC
Allocative Efficiency
Price = MC
Underallocation...
PURE COMPETITION AND EFFICIENCY
Productive Efficiency
Price = Minimum ATC
Allocative Efficiency
Price = MC
Underallocation...
Coming Next...
Pure Monopoly
Chapter 24
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AP MIcro Perfect Competition

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AP MIcro Perfect Competition

  1. 1. Pure Competitio n 23C H A P T E R
  2. 2. Market Structure Continuum FOUR MARKET MODELS Pure Competition
  3. 3. Market Structure Continuum Pure Competition FOUR MARKET MODELS Imperfect Competition All Markets that are Not Purely Competitive
  4. 4. Market Structure Continuum Pure Competition FOUR MARKET MODELS Pure Monopoly
  5. 5. Market Structure Continuum Pure Competition Pure Monopoly FOUR MARKET MODELS Monopolistic Competition
  6. 6. Market Structure Continuum Pure Competition Pure Monopoly Monopolistic Competition FOUR MARKET MODELS Oligopoly
  7. 7. Market Structure Continuum Pure Competition Pure Monopoly Monopolistic Competition Oligopoly FOUR MARKET MODELS Pure Competition: • Very Large Numbers • Standardized Product • “Price Takers” • Free Entry and Exit
  8. 8. DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Perfectly Elastic Demand Price Taker Role For example...
  9. 9. $131 0 $ 0 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER
  10. 10. $131 131 0 1 $ 0 131 $131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ]
  11. 11. $131 131 131 0 1 2 $ 0 131 262 $131 131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ] ]
  12. 12. $131 131 131 131 0 1 2 3 $ 0 131 262 393 $131 131 131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ] ] ]
  13. 13. $131 131 131 131 131 0 1 2 3 4 $ 0 131 262 393 524 $131 131 131 131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ] ] ] ]
  14. 14. $131 131 131 131 131 131 131 131 131 131 131 0 1 2 3 4 5 6 7 8 9 10 $ 0 131 262 393 524 655 786 917 1048 1179 1310 $131 131 131 131 131 131 131 131 131 131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ] ] ] ] ] ] ] ] ] ]
  15. 15. $131 131 131 131 131 131 131 131 131 131 131 0 1 2 3 4 5 6 7 8 9 10 $ 0 131 262 393 524 655 786 917 1048 1179 1310 $131 131 131 131 131 131 131 131 131 131 Product Price (P) (Average Revenue) Total Revenue (TR) Marginal Revenue (MR) Quantity Demanded (Q) DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER ] ] ] ] ] ] ] ] ] ] Graphically Presented…
  16. 16. DEMAND, MARGINAL REVENUE, AND TOTAL REVENUE IN PURE COMPETITION TR D = MR 1 2 3 4 5 6 7 8 9 10 1179 1048 917 786 655 524 393 262 131 0 Priceandrevenue Quantity Demanded (sold)
  17. 17. SHORT-RUN PROFIT MAXIMIZATION Two Approaches... First: Total-Revenue -Total Cost Approach The Decision Rule: Produce in the short-run if it can realize 1- A profit (or) 2- A loss less than its fixed costs The Decision Process: •Should the firm produce? •What quantity should be produced? •What profit or loss will be realized?
  18. 18. SHORT-RUN PROFIT MAXIMIZATION Two Approaches... First: Total-Revenue -Total Cost Approach The Decision Rule: Produce in the short-run if it can realize 1- A profit (or) 2- A loss less than its fixed costs The Decision Process: •Should the firm produce? •What quantity should be produced? •What profit or loss will be realized? Applied Graphically…
  19. 19. Total Cost 0 1 2 3 4 5 6 7 8 9 10 Total Product Total Fixed Cost Total Variable Cost Total Revenue Profit $ 100 100 100 100 100 100 100 100 100 100 100 $ 0 90 170 240 300 370 450 540 650 780 930 $ 100 190 270 340 400 470 550 640 750 880 1030 Price: $131 - $100 - 59 - 8 + 53 + 124 + 185 + 236 + 277 + 298 + 299 + 280 TOTAL REVENUE-TOTAL COST APPROACH $ 0 131 262 393 524 655 786 917 1048 1179 1310
  20. 20. Total Cost 0 1 2 3 4 5 6 7 8 9 10 Total Product Total Fixed Cost Total Variable Cost Total Revenue Profit $ 100 100 100 100 100 100 100 100 100 100 100 $ 0 90 170 240 300 370 450 540 650 780 930 $ 100 190 270 340 400 470 550 640 750 880 1030 Price: $131 - $100 - 59 - 8 + 53 + 124 + 185 + 236 + 277 + 298 + 299 + 280 TOTAL REVENUE-TOTAL COST APPROACH $ 0 131 262 393 524 655 786 917 1048 1179 1310
  21. 21. $1,800 1,700 1,600 1,500 1,400 1,300 1,200 1,100 1,000 900 800 700 600 500 400 300 200 100 0 Totalrevenueandtotalcost Total Revenue Total Cost Maximum Economic Profits $299 Break-Even Point (Normal Profit) Break-Even Point (Normal Profit) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 TOTAL REVENUE-TOTAL COST APPROACH
  22. 22. SHORT-RUN PROFIT MAXIMIZATION Two Approaches... First: Total-Revenue -Total Cost Approach Three Characteristics of MR=MC Rule: • The rule applies only if producing is preferred to shutting down • Rule applies to all markets • Rule can be restated P=MC Second: Marginal-Revenue -Marginal Cost Approach MR = MC Rule
  23. 23. Average Total Cost 0 1 2 3 4 5 6 7 8 9 10 Total Product Average Fixed Cost Average Variable Cost Price = Marginal Revenue Total Economic Profit/Loss $100.00 50.00 33.33 25.00 20.00 16.67 14.29 12.50 11.11 10.00 $90.00 85.00 80.00 75.00 74.00 75.00 77.14 81.25 86.67 93.00 $190.00 135.00 113.33 100.00 94.00 91.67 91.43 93.75 97.78 103.00 - $100 - 59 - 8 + 53 + 124 + 185 + 236 + 277 + 298 + 299 + 280 MARGINAL REVENUE-MARGINAL COST APPROACH $ 131 131 131 131 131 131 131 131 131 131 Marginal Cost 90 80 70 60 70 80 90 110 130 150 The same profit maximizing result!
  24. 24. Average Total Cost 0 1 2 3 4 5 6 7 8 9 10 Total Product Average Fixed Cost Average Variable Cost Price = Marginal Revenue Total Economic Profit/Loss $100.00 50.00 33.33 25.00 20.00 16.67 14.29 12.50 11.11 10.00 $90.00 85.00 80.00 75.00 74.00 75.00 77.14 81.25 86.67 93.00 $190.00 135.00 113.33 100.00 94.00 91.67 91.43 93.75 97.78 103.00 - $100 - 59 - 8 + 53 + 124 + 185 + 236 + 277 + 298 + 299 + 280 MARGINAL REVENUE-MARGINAL COST APPROACH $ 131 131 131 131 131 131 131 131 131 131 Marginal Cost 90 80 70 60 70 80 90 110 130 150 Graphically
  25. 25. $200 150 100 50 0 CostandRevenue 1 2 3 4 5 6 7 8 9 10 MC MR AVC ATC Economic Profit $131.00 $97.78 MARGINAL REVENUE-MARGINAL COST APPROACH Profit Maximization Position
  26. 26. $200 150 100 50 0 CostandRevenue 1 2 3 4 5 6 7 8 9 10 MC MR AVC ATC Economic Profit $131.00 $97.78 MARGINAL REVENUE-MARGINAL COST APPROACH MR = MC Optimum Solution Profit Maximization Position
  27. 27. the MR=MC rule still applies If the price is lowered from $131 to $81… …but the MR = MC point changes. MARGINAL REVENUE-MARGINAL COST APPROACH Loss Minimization Position
  28. 28. $200 150 100 50 0 CostandRevenue 1 2 3 4 5 6 7 8 9 10 MC MR AVC ATC Economic Loss $81.00 $91.67 MARGINAL REVENUE-MARGINAL COST APPROACH Loss Minimization Position
  29. 29. $200 150 100 50 0 CostandRevenue 1 2 3 4 5 6 7 8 9 10 MC MR AVC ATC $71.00 MARGINAL REVENUE-MARGINAL COST APPROACH Short-Run Shut Down Point Minimum AVC is the Shut-Down Point
  30. 30. MARGINAL REVENUE-MARGINAL COST APPROACH Marginal Cost & Short-Run Supply Price Quantity Supplied Maximum Profit (+) Or Minimum Loss (-) Observe the impact upon profitability as price is changed $151 131 111 91 81 71 61 10 9 8 7 6 0 0 $+480 +299 +138 -3 -64 -100 -100
  31. 31. CostandRevenue,(dollars) MC MR1 AVC ATC MARGINAL REVENUE-MARGINAL COST APPROACH Quantity Supplied MR2 MR3 MR4 MR5 P1 P2 P3 P4 P5 Q2 Q3 Q4 Q5 Marginal Cost & Short-Run Supply Do not Produce – Below AVC Break-even (Normal Profit) Point
  32. 32. CostandRevenue,(dollars) MC MR1 MARGINAL REVENUE-MARGINAL COST APPROACH Quantity Supplied MR2 MR3 MR4 MR5 P1 P2 P3 P4 P5 Q2 Q3 Q4 Q5 Marginal Cost & Short-Run Supply Yields the Short-Run Supply Curve Supply No Production Below AVC
  33. 33. MARGINAL REVENUE-MARGINAL COST APPROACH Marginal Cost & Short-Run Supply AVC2 MC2 Higher Costs Move the Supply Curve to the Left CostandRevenue,(dollars) MC1 AVC1 Quantity Supplied S1 S2
  34. 34. MARGINAL REVENUE-MARGINAL COST APPROACH Marginal Cost & Short-Run Supply AVC2 MC2 Lower Costs Move the Supply Curve to the Right CostandRevenue,(dollars) MC1 AVC1 Quantity Supplied S1 S2
  35. 35. P Q S=MC AVC ATC 8 D P Q8000 D S= MCs IndustryFirm (price taker) Economic Profit $111$111 SHORT-RUN COMPETITIVE EQUILIBRIUM The Competitive Firm “Takes” its Price from the Industry Equilibrium
  36. 36. P Q S=MC AVC ATC 8 D P Q8000 D S= MCs IndustryFirm (price taker) Economic Profit $111$111 SHORT-RUN COMPETITIVE EQUILIBRIUM The Competitive Firm “Takes” its Price from the Industry Equilibrium How about the long-run?
  37. 37. PROFIT MAXIMIZATION IN THE LONG RUN Assumptions... • Entry and Exit Only • Identical Costs • Constant-Cost Industry Goal of the Analysis Price = Minimum ATC Long-Run Equilibrium - The Zero Economic Profit Model
  38. 38. Temporary profits and the reestablishment of long-run equilibrium S1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN MR D1
  39. 39. An increase in demand increases profits… MR D1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN D2 Economic Profits S1
  40. 40. New competitors increase supply, and lower prices decrease economic profits. MR D1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN D2 Zero Economic Profits S1 S2
  41. 41. Decreases in demand, losses, and the reestablishment of long-run equilibrium S1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN D1 MR
  42. 42. A decrease in demand creates losses… MR D1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN D2 Economic Losses S1
  43. 43. MR D1 MC ATC P Q100 P Q100,000 IndustryFirm (price taker) $60 50 40 $60 50 40 PROFIT MAXIMIZATION IN THE LONG RUN D2 Return to Zero Economic Profits S1 S3 Competitors with losses decrease supply prices return to zero economic profits.
  44. 44. LONG-RUN SUPPLY IN A CONSTANT COST INDUSTRY Constant Cost Industry Perfectly Elastic Long-Run Supply Graphically...
  45. 45. P Q =$50 S D1 Z1 Q1 D2 Z2 Q2Q3 D3 Z3 100,000 110,00090,000 LONG-RUN SUPPLY IN A CONSTANT COST INDUSTRY P1 P2 P3
  46. 46. P Q =$50 S D1 Z1 Q1 D2 Z2 Q2Q3 D3 Z3 100,000 110,00090,000 LONG-RUN SUPPLY IN A CONSTANT COST INDUSTRY P1 P2 P3 How does an increasing cost industry differ?
  47. 47. P Q $55 50 45 S D1 Y1 Q1 D2 Y2 Q2Q3 D3 Y3 100,000 110,00090,000 LONG-RUN SUPPLY IN AN INCREASING COST INDUSTRY P1 P2 P3
  48. 48. P Q $55 50 45 S D1 Y1 Q1 D2 Y2 Q2Q3 D3 Y3 100,000 110,00090,000 P1 P2 P3 How does a decreasing cost industry differ? LONG-RUN SUPPLY IN AN INCREASING COST INDUSTRY
  49. 49. P Q $55 50 45 S D1 Y1 Q1 D2 Y2 Q2Q3 D3 Y3 100,000 110,00090,000 P1 P2 P3 What is the long- run competitive equilibrium? LONG-RUN SUPPLY IN AN INCREASING COST INDUSTRY
  50. 50. P MR Q MC ATC Quantity Price Price = MC = Minimum ATC (normal profit) LONG-RUN EQUILIBRIUM FOR A COMPETITIVE FIRM
  51. 51. PURE COMPETITION AND EFFICIENCY Productive Efficiency Price = Minimum ATC Allocative Efficiency Price = MC Underallocation Price > MC Overallocation Price < MC
  52. 52. PURE COMPETITION AND EFFICIENCY Productive Efficiency Price = Minimum ATC Allocative Efficiency Price = MC Underallocation Price > MC Overallocation Price < MC
  53. 53. PURE COMPETITION AND EFFICIENCY Productive Efficiency Price = Minimum ATC Allocative Efficiency Price = MC Underallocation Price > MC Overallocation Price < MC
  54. 54. PURE COMPETITION AND EFFICIENCY Productive Efficiency Price = Minimum ATC Allocative Efficiency Price = MC Underallocation Price > MC Overallocation Price < MC
  55. 55. Coming Next... Pure Monopoly Chapter 24

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