1) The document discusses the concept of perfect competition and firm equilibrium under conditions of perfect competition.
2) A key aspect of perfect competition is that there are many small producers and consumers in the market buying and selling homogeneous products, and all participants have perfect information. The market price is determined by supply and demand forces outside the control of individual firms.
3) For a firm to be in equilibrium under perfect competition, its marginal cost must equal its marginal revenue (which is equal to the market price). At this equilibrium point, the firm maximizes its profits.
4) The document contrasts the short run and long run equilibriums for firms under perfect competition and how super normal profits, normal profits
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.
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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.
FellowBuddy.com is an innovative platform that brings students together to share notes, exam papers, study guides, project reports and presentation for upcoming exams.
We connect Students who have an understanding of course material with Students who need help.
Benefits:-
# Students can catch up on notes they missed because of an absence.
# Underachievers can find peer developed notes that break down lecture and study material in a way that they can understand
# Students can earn better grades, save time and study effectively
Our Vision & Mission – Simplifying Students Life
Our Belief – “The great breakthrough in your life comes when you realize it, that you can learn anything you need to learn; to accomplish any goal that you have set for yourself. This means there are no limits on what you can be, have or do.”
Like Us - https://www.facebook.com/FellowBuddycom
Equilibrium of Firm Under Perfect CompetitionPiyush Kumar
The ppt incorporates lots of animations for clear explanation on graphs and curves, it's better to download it first and then surely you will be cherished with it
Equilibrium of firm and Industry under Perfect CompetitionBikash Kumar
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Md. Sultan Mahmud
Md. Shaon Mollah
Md. Mamun Miah
Md. Abid Hasan
Shimul Kumar Mondal
Equilibrium of Firm Under Perfect CompetitionPiyush Kumar
The ppt incorporates lots of animations for clear explanation on graphs and curves, it's better to download it first and then surely you will be cherished with it
Equilibrium of firm and Industry under Perfect CompetitionBikash Kumar
Macro Economics
For downloading this contact- bikashkumar.bk100@gmail.com
Prepared by Students of University of Rajshahi
Md. Sultan Mahmud
Md. Shaon Mollah
Md. Mamun Miah
Md. Abid Hasan
Shimul Kumar Mondal
perfect competition, monopoly, monopolistic and oligopolysandypkapoor
Price determination under different market structure and characterstics of all these market stractures along with graphical presentation of Perfect competition, Monopoly, Monopolistic and Oligopoly market structue
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 ...
A market is perfectly competitive if
There are large number of sellers and buyers of the commodity – therefore no individuals can influence price
Homogeneous products across all firms in the industry.
Perfect mobility of resources.
All the economic agents (consumers, producers, factor owners) in the market have perfect knowledge of present and future prices and costs
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todays biggest issue ... there are no youths in politics due to certain reasons but we v offen complain for that situation
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A workshop hosted by the South African Journal of Science aimed at postgraduate students and early career researchers with little or no experience in writing and publishing journal articles.
Macroeconomics- Movie Location
This will be used as part of your Personal Professional Portfolio once graded.
Objective:
Prepare a presentation or a paper using research, basic comparative analysis, data organization and application of economic information. You will make an informed assessment of an economic climate outside of the United States to accomplish an entertainment industry objective.
Executive Directors Chat Leveraging AI for Diversity, Equity, and InclusionTechSoup
Let’s explore the intersection of technology and equity in the final session of our DEI series. Discover how AI tools, like ChatGPT, can be used to support and enhance your nonprofit's DEI initiatives. Participants will gain insights into practical AI applications and get tips for leveraging technology to advance their DEI goals.
Normal Labour/ Stages of Labour/ Mechanism of LabourWasim Ak
Normal labor is also termed spontaneous labor, defined as the natural physiological process through which the fetus, placenta, and membranes are expelled from the uterus through the birth canal at term (37 to 42 weeks
Strategies for Effective Upskilling is a presentation by Chinwendu Peace in a Your Skill Boost Masterclass organisation by the Excellence Foundation for South Sudan on 08th and 09th June 2024 from 1 PM to 3 PM on each day.
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Explore how micro-credentials are transforming Technical and Vocational Education and Training (TVET) with this comprehensive slide deck. Discover what micro-credentials are, their importance in TVET, the advantages they offer, and the insights from industry experts. Additionally, learn about the top software applications available for creating and managing micro-credentials. This presentation also includes valuable resources and a discussion on the future of these specialised certifications.
For more detailed information on delivering micro-credentials in TVET, visit this https://tvettrainer.com/delivering-micro-credentials-in-tvet/
A review of the growth of the Israel Genealogy Research Association Database Collection for the last 12 months. Our collection is now passed the 3 million mark and still growing. See which archives have contributed the most. See the different types of records we have, and which years have had records added. You can also see what we have for the future.
A Strategic Approach: GenAI in EducationPeter Windle
Artificial Intelligence (AI) technologies such as Generative AI, Image Generators and Large Language Models have had a dramatic impact on teaching, learning and assessment over the past 18 months. The most immediate threat AI posed was to Academic Integrity with Higher Education Institutes (HEIs) focusing their efforts on combating the use of GenAI in assessment. Guidelines were developed for staff and students, policies put in place too. Innovative educators have forged paths in the use of Generative AI for teaching, learning and assessments leading to pockets of transformation springing up across HEIs, often with little or no top-down guidance, support or direction.
This Gasta posits a strategic approach to integrating AI into HEIs to prepare staff, students and the curriculum for an evolving world and workplace. We will highlight the advantages of working with these technologies beyond the realm of teaching, learning and assessment by considering prompt engineering skills, industry impact, curriculum changes, and the need for staff upskilling. In contrast, not engaging strategically with Generative AI poses risks, including falling behind peers, missed opportunities and failing to ensure our graduates remain employable. The rapid evolution of AI technologies necessitates a proactive and strategic approach if we are to remain relevant.
2. Introduction
There are different types of
market on the basis of levels
of competition . The market
with perfect competition is
considered very important .
However, The market with
perfect competition is never
found . Yet its study is very
useful because it creates an
ideal economic system.
3. • There are large number of buyers and sellers of the
homogeneous product in the market
Well-informed producers and consumers about the
market
Only one price of a commodity in the whole market
Free entry (for new firms) and free exit (for old firms)
Price of a commodity is determined by the Industry and
at the determined price all the Firms can sell any
number of units of the commodity
So under perfect competition the firm is price-takerprice-taker
not a price-makerprice-maker
4. What is firm ?
A Firm is a group of people, with production tools, located in
some premises, who, with work, transform raw materials into
goods and services, and sell them
Can also be defined as a business unit which owns, controls
and manages a plant or plants, where plant refers to the
technical unit
5. Then, What to Industry refers?Then, What to Industry refers?
The Firm and Industry are two different
entities but co-related
A group of Firms producing a
homogeneous products is called
Industry and conversely we can say
a Firm is the company that operates
within the Industry to create that
product
An Industry is the name given to a certain
type of manufacturing or retailing environment
For example, the retail industry is the industry
that involves everything from clothes to
computers
6. AR(Average revenue) curve and MR(Marginal Revenue) curve
under perfect competition becomes equal to D(Demand) curve
and it would be a horizontal line or parallel to the X-axis
The curve simply implies
that a firm under perfect
competition can sell
as much quantity as
it likes at the given
price determined by the
industry
i.e. a perfectly
elastic demand curve
Perfectly Elastic Demand
Curve(AR=MR=D)
1 2 3 4
Price
Commodity
7. Now the Meaning of Firm equilibriumNow the Meaning of Firm equilibrium
‘Equilibrium’ means a state of rest from which there
is no net tendency to move
So the Firm’s Equilibrium means, “the level of output
where the firm is maximizing its profits and
therefore, has no tendency to change its output”.
In this situation either the Firm will be earning
maximum profit or incurring minimum loss i.e. it
refers to the profit maximization
In the words of HansenHansen, “A Firm will be in
equilibrium when it is of no advantage to increase or
decrease its output”.
7
8. NecessaryNecessary ConditionsConditions For The FirmFor The Firm
EquilibriumEquilibrium
Profit of a Firm is equal to the difference between
its total revenue (TR) and the total cost (TC) i.e.,
(Profit=TR-TC) and so for the equilibrium of the Firm
it should be maximum
Marginal cost should be equal to Marginal revenue
(MC=MR)
And when these are equal profit is maximum
Equality of MR and MC is necessary but not
sufficient, so the sufficient condition is that MC
curve should cut the MR curve from below not from
the above
No firm has an incentive to change its behavior
8
9. Contd..Contd..
There are two points at which MR (=AR) =MC but at
both the points the Firm can’t be in equilibrium or
can’t have maximum profit
As stated before, as a sufficient
condition for the
equilibrium MC curve
should cut the MR curve
from below which is
point A
9
Cost/Revenue
MNO
B A
MC
AR=MR
Output
10. Firm Equilibrium Under PerfectFirm Equilibrium Under Perfect
Competition In Two Time PeriodsCompetition In Two Time Periods
As a matter of fact, the price of a good is determined
at a point where its demand is equal to supply and so
further it depends on the time taken by the demand
and supply to adjust themselves
So this time element plays a vital role in determination
of price of the goods
Acc. to AlfredAlfred MarshallMarshall - If the period is short, price
determination will be influenced more by the demand,
on the other hand, if the period is long it will be
influenced more by the supply
So the two periods we have to study-
Short Period
Long Period
10
11. Short Run Firm EquilibriumShort Run Firm Equilibrium
In Short run, the Firm output (supply) can be changed only by
the variable factors (like labor force through overtime),
fixed factors (like machinery) can’t be changed
There is not enough time for new Firms to enter the
Industry.
Further, if the demand is increased, the supply can be
increased only up to its existing production capacityexisting production capacity
A firm in Short Run Equilibrium may face one of these
situations
Super Normal ProfitsSuper Normal Profits
Normal ProfitsNormal Profits
Suffer Minimum LossesSuffer Minimum Losses
Shut Down PointShut Down Point
For the analysis of these situations Short-run Average Cost
curve (SAC) will be introduced
11
12. A Firm in Equilibrium earns super normal profit, when
average revenue (price per unit) determined by the
Industry is more than its short-run average cost (SAC)
Firm equilibrium point=E, where MR (=AR) = SMC
Equilibrium output=EM
Since AR(EM)>SAC(AM)
Firm is earning EA super
normal profit per unit of
output
Total super normal profit
of the Firm on OM output
=BAxEA (OMxEA)=EABP
=Shaded area
Super-Normal Profits : ARSuper-Normal Profits : AR>>SACSAC 12
Cost/Revenue
M
A
O
SAC
SMC
AR=MR
Output
Super Normal Profit
EP
B
13. A Firm in Equilibrium earns normal profit, when average
revenue (price per unit) determined by the Industry is
equal to its short-run average cost (SAC)
Firm equilibrium point=E, where MR (=AR) = SMC
Equilibrium output=EM
At this output AR and SAC
both are equal to EM and
Firm is earning normal
profit per unit of output
It results in no gain in
terms of money for an
entrepreneur as this
profit is included in the
cost of production
Normal Profits : AR=SACNormal Profits : AR=SAC 13
Cost/Revenue
MO
SAC SMC
AR=MR
Output
EP
14. A Firm may continue production even if it is incurring losses
because in sort run, it can’t leave the Industry
Obviously in this situation of loss, a Firm will be in
equilibrium at that level of output where it gets the minimum
losses i.e. when
SAC is more than AR
At equilibrium AR=EM and
SAC=AM and also from
graph AR<SAC
Firm’s per unit loss=AE
i.e. (AM-EM) Total loss
at OM level of output
=OMxAE i.e. EABP
Even if Firm discontinues
the production, it will have
to bear the loss of fixed
cost which is minimum
possible loss of a Firm
Minimum Loss : ARMinimum Loss : AR<<SACSAC
14
Cost/Revenue
MO
SAC
SMC
AR=MR
Output
EP
AB
Loss
15. Shut down Point : ARShut down Point : AR<<SAC : AR=SAVCSAC : AR=SAVC
Cost/Revenue
The firm will shut down if it cannot cover average variable
costs i.e when AR=SAVC
A firm should continue to produce as long as price is greater
than average variable cost
Once price falls below that
point it makes sense to shut
down temporarily and save
the variable costs
If prices rises to OP1
than Firm can cover some
of its Fixed costs also
So the minimum point of
SAVC is called Firm’s
Shut down point
The shutdown point is
the point at which the
firm will gain more by
shutting down than it will
by staying in business 15Output
M
O
SAC
SMC
AR=MREP
AB
P1
SAVC
AR1=MR 1
Shut-down
point
16. Long Run Firm EquilibriumLong Run Firm Equilibrium
In Long run, the Firm’s output (supply) can be changed
by both the variable factors and fixed factors i.e. all
factors become variable
There is enough time for new Firms to enter the
Industry
Further, if the demand is increased, the supply can be
increased or decreased according to the demand
Summarizing, in long run a Firm can make all sorts of
changes
For Long run equilibrium, long run marginal cost (LMC)
is equal to MR and LMC curve cut the MR curve from
below
In case of long run equilibrium, all the firms will earn
only normal profits
even if there are other situations of short run they
will sustain only few a times
16
17. Contd..Contd..
Take the case when the Firm earn super-normal profit-
Then the existing Firm will increase their production
and new Firm will enter the Industry
Consequently, the total supply will increase and price
fall down and further results in normal profit for the
firm
On the contrary, if the firm is incurring losses
Then some Firm will leave the Industry which will
reduce the total supply
And due to decrease in supply, price will rise and once
again Firm will begin to earn normal profit
The normal profit of a firm is also termed as zero
economic profit as this is included in the cost of
production not in the economic profit
17
18. Contd..Contd..
Firm equilibrium is at the minimum point of its LAC and at
this point the Firm will get the normal profits
If AR (price) rises to OP1, then Firm’s LMC cuts its MR1 at
E1 and the firm
gets super-normal profit
but again come to OP
yielding normal profits
as stated before
And at price OP2 Firm
incurs losses but again
rise to level OP to
maintain the equilibrium
at normal profit
Firms equilibrium:
MC=MR=AR=min LACMC=MR=AR=min LAC
17
Cost/Revenue
Output
MO
LAC
LMC
AR2=MR2
E2
P
P1
P 2
AR=MR
AR1=MR 1
E1
E
M2 M1