The document discusses market structures, specifically perfect competition. It defines key characteristics of perfect competition including a large number of small firms, homogeneous products, free entry and exit, and firms being price takers. Under perfect competition, each firm's demand curve is perfectly elastic and marginal revenue equals price. Firms produce where price equals marginal cost to maximize profits. In the long run, normal profits are achieved as entry and exit cause supply to equal demand. Perfect competition leads to allocative and productive efficiency.
This PPT includes Oligopoly Market. It is explained in detail.
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This PPT includes Oligopoly Market. It is explained in detail.
This is for educational purpose only. If you own any of the content please let me know. We are not here to hurt anyone's emotion. Please try to co-operate and use this for educational purposes only.
Perfect Competition content slideshow. Designed for the Economics A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Perfect Competition
Equilibria of Perfect Competition
Market Shocks in Perfect Competition
Evaluating Perfect Competition
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
Perfect Competition content slideshow. Designed for the Economics A level qualification. Can be used in revision and in class.
Subtopics:
Intro to Perfect Competition
Equilibria of Perfect Competition
Market Shocks in Perfect Competition
Evaluating Perfect Competition
Students should be able to:
Understand the assumptions of perfect competition and be able to explain the behaviour of firms in this market structure.
Understand the significance of firms as price-takers in perfectly competitive markets. An understanding of the meaning of shut-down point is required. The impact of entry into and exit from the industry should be considered.
Chapter (14) Firms in Competitive Markets In this ch.docxtidwellveronique
Chapter (14)
Firms in Competitive Markets
In this chapter, we will discuss the general characteristics of a perfectly competitive
market, and the operations of a perfectly competitive firm.
In any economy, there exists a number of market structures, these are:
1. Perfectly competitive market.
2. Monopoly
3. Oligopoly
4. Monopolistic competitive market.
In the chapter, we will discuss the perfectly competitive market, whereas the following 3
chapters will introduce to us the other market structures.
One major difference between perfectly competitive market and all other markets is that
all these markets (other than the perfectly competitive market) are considered imperfectly
competitive markets.
What do perfectly and imperfectly competitive markets mean?
We will start first by listing the major characteristics of a perfectly competitive market.
Characteristics of a perfectly competitive market:
1. Many small sellers that no producer can affect the market price of the product.
2. Many small consumers that no consumer can affect the market price of the product.
3. Homogeneous or standard product supplied by all producers.
4. Any firm operating in this market is a price taker, where firms in this market produce
and sell at the given market price.
5. Barriers to entry to this market are very low and even nonexistent. Hence firms can
enter and leave the industry freely.
From the above characteristics, we can conclude the following definition of a perfectly
competitive market:
A perfectly competitive market is a market where any firm has no control on
determining the price of its product. In other words, it is the market forces (that is
forces of DD and SS) that determines the price of perfectly competitive firms’ products,
and the firms operating in this market accept these market ‘prices; hence we call perfectly
competitive firms as price-takers that is taking the price of their products from the market
and having no control on setting or determining the price of their products.
When a firm has no control on setting the price of its product, its DD curve is a
completely horizontal curve.
On the other side, imperfectly competitive market is a market where the operating firms
have some degree of control on setting the price of their products. The degree of control
determines the degree of imperfection existing in this market. Sine an imperfectly
competitive firm controls the price of its product, then its DD curve is a downward-
sloping curve.
In economics, we identify 3 major imperfectly competitive markets:
1. Monopoly
2. Oligopoly
3. Monopolistic Competitive Market
Objectives, Important Decisions: and Operations of a Perfectly Competitive Firm
To understand the operations of a perfectly competitive firm, we need to recall some
algebraic theorems to understand the below analysis.
1. When we have a horizontal function, its first derivative should be ...
Similar to Market structures – perfect competition (20)
19. Price and output determination for a perfectly competitive firm D S Q Q P P Industry Firm P * P * AC MC Q * Q * E C B A AR = MR
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22. Measuring Profit in the Graph for the Competitive Firm... Quantity 0 Price P = AR = MR ATC MC P Profit-maximizing quantity A Firm with Profits Profit Q ATC
23. Measuring Profit in the Graph for the Competitive Firm... Quantity 0 Price P = AR = MR ATC MC P Q Loss-minimizing quantity A Firm with Losses Loss ATC
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