Firms face different costs in the short-run depending on their level of output. Total costs include total fixed costs, which do not vary with output, and total variable costs, which do vary with output. As a firm's output increases, average fixed costs decline due to spreading fixed costs over more units of output. Average variable costs and average total costs initially decline as well, but eventually increase once diminishing returns set in and marginal costs rise. Understanding how costs change with output level is important for firms seeking to minimize costs and maximize profits.
The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It defines key characteristics of each structure and provides examples. The goal of firms is also discussed as profit maximization, which is determined by revenues and costs in the short and long run under different market conditions.
Firms face different costs in the short-run depending on their level of output. Total costs include total fixed costs, which do not vary with output, and total variable costs, which do vary with output. As a firm's output increases, average fixed costs decline due to spreading fixed costs over more units of output. Average variable costs and average total costs initially decline as well, but eventually begin increasing once diminishing returns set in. Marginal cost, the change in total costs from an additional unit of output, also increases once diminishing returns occur. Understanding how costs change with output level and productivity helps firms maximize profits.
This chapter discusses profit maximization and competitive supply. It covers key topics such as:
- Perfectly competitive markets and the assumptions of price taking, product homogeneity, and free entry/exit
- How a competitive firm determines its profit-maximizing output level by producing where marginal revenue equals marginal cost
- How a competitive firm's short-run supply curve is determined from its marginal cost curve
- How the market supply curve is formed by summing the individual supply curves of all firms in the industry
Mba1014 oligopoly & monopolistic competition 250513Stephen Ong
This document discusses monopolistic competition and oligopoly. It defines monopolistic competition as having many small firms producing differentiated products. Oligopoly is dominated by a small number of large firms where there is mutual interdependence. Pricing under oligopoly is discussed, including the kinked demand curve model where firms will match price cuts but not increases. Game theory models like the prisoner's dilemma are also introduced.
The key steps are:
1) Find where MC = MR (the equilibrium point) to determine optimal output
2) Drop down from the equilibrium point to the ATC curve to find the profit per unit
3) Multiply profit per unit by output to find total profit
So in summary, the graph shows how to determine optimal output, profit per unit, and total profit by comparing MC, MR, and ATC curves. The intersection of MC=MR gives the profit-maximizing quantity, and comparing that to ATC gives the profit amount.
Market structure identifies how competitive a market is based on factors like the number of firms, nature of products, degree of monopoly power, and barriers to entry. It ranges from perfect competition on the highly competitive end to pure monopoly on the less competitive end. The further right on the scale, the greater the monopoly power of firms. Market structure models are representations of reality that help analyze industry competition levels and firm behavior.
The document discusses different market structures:
1. Perfect competition has many small firms producing similar goods. Monopolistic competition and oligopoly have some imperfect elements.
2. Monopolistic competition features product differentiation, free entry and exit, and firms competing on attributes like price, quality, and marketing.
3. Oligopoly is characterized by a small number of firms where each firm's actions impact others. It involves interdependence but also a temptation for anti-competitive collusion.
Monopolistic competition is a market structure with many small businesses that produce differentiated products. Each business has some control over price due to product differentiation but faces competition from substitutable products. Key features include differentiated but substitutable products, many sellers and buyers, free entry and exit, and profit maximization through product differentiation and non-price competition like advertising. In long run equilibrium, firms earn only normal profits as entry by new firms eliminates excess profits. Output is lower and prices higher under monopolistic competition compared to perfect competition.
The document discusses different market structures including perfect competition, monopoly, monopolistic competition, and oligopoly. It defines key characteristics of each structure and provides examples. The goal of firms is also discussed as profit maximization, which is determined by revenues and costs in the short and long run under different market conditions.
Firms face different costs in the short-run depending on their level of output. Total costs include total fixed costs, which do not vary with output, and total variable costs, which do vary with output. As a firm's output increases, average fixed costs decline due to spreading fixed costs over more units of output. Average variable costs and average total costs initially decline as well, but eventually begin increasing once diminishing returns set in. Marginal cost, the change in total costs from an additional unit of output, also increases once diminishing returns occur. Understanding how costs change with output level and productivity helps firms maximize profits.
This chapter discusses profit maximization and competitive supply. It covers key topics such as:
- Perfectly competitive markets and the assumptions of price taking, product homogeneity, and free entry/exit
- How a competitive firm determines its profit-maximizing output level by producing where marginal revenue equals marginal cost
- How a competitive firm's short-run supply curve is determined from its marginal cost curve
- How the market supply curve is formed by summing the individual supply curves of all firms in the industry
Mba1014 oligopoly & monopolistic competition 250513Stephen Ong
This document discusses monopolistic competition and oligopoly. It defines monopolistic competition as having many small firms producing differentiated products. Oligopoly is dominated by a small number of large firms where there is mutual interdependence. Pricing under oligopoly is discussed, including the kinked demand curve model where firms will match price cuts but not increases. Game theory models like the prisoner's dilemma are also introduced.
The key steps are:
1) Find where MC = MR (the equilibrium point) to determine optimal output
2) Drop down from the equilibrium point to the ATC curve to find the profit per unit
3) Multiply profit per unit by output to find total profit
So in summary, the graph shows how to determine optimal output, profit per unit, and total profit by comparing MC, MR, and ATC curves. The intersection of MC=MR gives the profit-maximizing quantity, and comparing that to ATC gives the profit amount.
Market structure identifies how competitive a market is based on factors like the number of firms, nature of products, degree of monopoly power, and barriers to entry. It ranges from perfect competition on the highly competitive end to pure monopoly on the less competitive end. The further right on the scale, the greater the monopoly power of firms. Market structure models are representations of reality that help analyze industry competition levels and firm behavior.
The document discusses different market structures:
1. Perfect competition has many small firms producing similar goods. Monopolistic competition and oligopoly have some imperfect elements.
2. Monopolistic competition features product differentiation, free entry and exit, and firms competing on attributes like price, quality, and marketing.
3. Oligopoly is characterized by a small number of firms where each firm's actions impact others. It involves interdependence but also a temptation for anti-competitive collusion.
Monopolistic competition is a market structure with many small businesses that produce differentiated products. Each business has some control over price due to product differentiation but faces competition from substitutable products. Key features include differentiated but substitutable products, many sellers and buyers, free entry and exit, and profit maximization through product differentiation and non-price competition like advertising. In long run equilibrium, firms earn only normal profits as entry by new firms eliminates excess profits. Output is lower and prices higher under monopolistic competition compared to perfect competition.
The document discusses pricing under different market structures:
1) Monopolistic competition is characterized by many small sellers offering differentiated products. Firms have some pricing power but face elastic demand. They produce sub-optimally in both the short and long run.
2) Pure competition has many buyers and sellers of homogeneous products. Each firm is a price taker and production is at minimum average cost in the long run.
3) A pure monopoly has sole control of supply and faces downward sloping demand. It prices where marginal revenue equals marginal cost to maximize profits.
4) Oligopoly is dominated by a few interdependent firms. Pricing depends on factors like rivals' prices, advertising
This document summarizes the key aspects of monopolistic competition. It was prepared by Dipak Mer and Swati Parmar for MK Bhavnagar University. The founding theorist of monopolistic competition was Edward Chamberlin, who described it in his 1933 book. Monopolistic competition involves many producers selling differentiated but substitutable products. Firms have some degree of market power but also face competition. In both the short and long run, firms will adjust output and prices to maximize profits or minimize losses. The model of monopolistic competition is compared to perfect competition, with outcomes including excess capacity and markups over marginal cost under monopolistic competition.
The document summarizes different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It defines each structure and provides examples of characteristics like number of sellers, product differentiation, barriers to entry, profit levels, and pricing behavior. Perfect competition has many small sellers of identical products, while monopoly has a single seller of unique products. Monopolistic competition and oligopoly involve intermediate levels of competition between differentiated products.
This document provides an overview of market structures including monopolistic competition and oligopoly. It discusses key characteristics of each structure such as product differentiation, barriers to entry, and interdependence between firms. The document also covers concepts like profit maximization, loss minimization, long-run equilibrium, price rigidity, game theory, and Nash equilibrium which are important for understanding firm behavior under different market conditions.
1) Monopolistic competition is an imperfect market structure between perfect competition and monopoly. It is characterized by many small businesses that sell differentiated products that are close substitutes for one another.
2) Firms have some control over prices under monopolistic competition. While there are many buyers and sellers, product differentiation gives firms some monopoly power over their brand.
3) In both the short run and long run, a monopolistically competitive firm will be in equilibrium when marginal revenue equals marginal cost, allowing the firm to maximize its profits. In the short run, firms can earn supernormal profits if price is above average cost.
There are several methods that oligopolistic firms use to set prices. Cost-based pricing sets price based on average costs, with some markup added. Competition-based pricing matches prices of similar products already on the market. Demand-based pricing considers how demand responds to price changes, allowing for perceived-value pricing and price discrimination between market segments. Strategy-based pricing for new products involves either price skimming to extract high prices from early adopters or penetration pricing at low initial prices to gain market share. Firms typically combine multiple pricing methods rather than relying on just one.
Market structure identifies how competitive a market is based on factors like the number of firms, degree of product differentiation, barriers to entry, and firms' pricing power. Markets range from perfect competition, where many small firms have no pricing power and entry is easy, to monopoly, where a single firm controls the entire market. Between these extremes are monopolistic competition, oligopoly, and duopoly, where firms have some degree of pricing power and influence over each other. The model used depends on the characteristics of the specific industry.
Market structure identifies how competitive a market is based on factors like the number of firms, degree of product differentiation, barriers to entry, and firms' pricing power. Markets range from perfect competition, where many small firms have no pricing power and entry is easy, to monopoly, where a single firm controls the entire market. Between these extremes are monopolistic competition, oligopoly, and duopoly, where firms have some degree of pricing power and influence over each other. The model used depends on the characteristics of the specific industry.
The document discusses market structure under perfect competition. It begins by defining key terms like market, market structure, and the two types of market structures - perfect competition and imperfect competition.
Under perfect competition, the market has several characteristics - homogeneous products, free entry and exit of firms, perfect information, and firms being price takers. The demand curve for an individual firm is horizontal, as it is a price taker. Equilibrium occurs where MR=MC and firms earn only normal profits in the long run. Changes in demand or supply can shift the equilibrium.
The document then discusses monopoly as an example of imperfect competition. Under monopoly there is a single seller, barriers to entry, no close substitutes, and
II.) Monopolistic competition is characterized by many small businesses that produce differentiated products with weak barriers to entry. In the short run, firms behave similarly to monopolies by producing where marginal revenue equals marginal cost. However, in the long run competition drives economic profits to zero as entry and exit occurs. While monopolistic competition provides variety for consumers, it is less efficient than perfect competition due to excess capacity and markups pricing above marginal cost.
The document provides an introduction to the theory of the firm, which attempts to explain how firms behave under different market conditions. It discusses three market structures - perfect competition, oligopoly, and monopoly. The theory of the firm includes production theory, cost theory, revenue theory, and profit maximization in different market types. It evaluates the market structures based on efficiency and welfare criteria.
Monopolistic practices and the role of competition commissions in the Indian economy. There are many sellers of differentiated products, free entry and exit in the market, and each firm faces a downward sloping demand curve (Monopolistic Competition). The Competition Commission of India prohibits anti-competitive agreements and abuse of dominant positions to promote efficiency, productivity, choice and reduce costs. Advertising is used by firms in monopolistic competition to attract customers to differentiated products and establish brand names as a signal of quality.
This document provides an overview of imperfect competition, specifically monopolistic competition and oligopolies/duopolies. It begins with definitions and key characteristics of these market structures. Monopolistic competition is described as having many firms that produce differentiated products and face elastic demand curves. Firms engage in non-price competition through advertising and branding. The document uses hotels as an example. Oligopolies and duopolies are described as having only a few firms, where each firm's decisions significantly impact competitors. Game theory is used to demonstrate mutual dependence between firms. The tendency for collusion but its illegality is also discussed.
Monopolistic competition is a market structure with many small businesses that sell differentiated products with some level of price-setting power in the short run. In the long run, free entry and exit of businesses leads to normal profits. Key features include differentiated products, free entry and exit of businesses, and price-taking behavior in the long run. Examples include restaurants, hairdressers, and clothing brands. The model assumes businesses are productively and allocatively inefficient in the short run but can achieve dynamic and X-efficiency in the long run. New trade theory explains international trade patterns using the concept of monopolistic competition.
Monopolistic competition is characterized by many small firms that produce differentiated products. In the short run, firms can earn economic profits by producing at a quantity where marginal revenue equals marginal cost. However, in the long run, free entry and exit causes the demand curve to shift left as more firms enter, eliminating economic profits and resulting in normal profits for firms. Firms produce at the minimum point of their average total cost curve where price equals average cost.
This document discusses different market structures including imperfect competition. It provides examples of monopolistic competition, oligopoly, and monopoly. For monopolistic competition, it describes characteristics like differentiated products, freedom of entry/exit, and firms having control over prices while facing downward sloping demand curves. For oligopoly, it notes the interdependence between a small number of firms. The document also discusses the Cournot model of duopoly and provides the De Beers diamond cartel as an example of collusion between firms.
There are several types of market structures that can exist based on the level of competition. Perfect competition occurs when many small firms produce identical goods and all firms and consumers have perfect information. Monopolies exist when there is only one seller of a unique product with no close substitutes and barriers to entry prevent competition. Oligopolies are markets with only a few large firms where the actions of one firm impact others. Monopolistic competition involves many firms with differentiated but similar products and free entry/exit in the long run.
This document summarizes key characteristics of monopolistic competition. In 3 sentences: Firms in monopolistic competition have differentiated but substitutable products, they set price between the monopoly and competitive levels where marginal revenue equals marginal cost to earn normal profits in the long run, and while this leads to higher prices than perfect competition it provides benefits to consumers like variety and innovation.
The document discusses different market structures including perfect competition, monopoly, oligopoly, and monopolistic competition. It describes the key characteristics of each structure such as the number of firms, product differentiation, barriers to entry, and firm behavior. Perfect competition has many small firms, identical products, and firms are price takers. A monopoly has a single dominant firm with barriers to entry. Oligopoly is dominated by a small number of large firms where behavior is interdependent. Monopolistic competition has many differentiated products and easy entry/exit.
The document discusses pricing under different market structures:
1) Monopolistic competition is characterized by many small sellers offering differentiated products. Firms have some pricing power but face elastic demand. They produce sub-optimally in both the short and long run.
2) Pure competition has many buyers and sellers of homogeneous products. Each firm is a price taker and production is at minimum average cost in the long run.
3) A pure monopoly has sole control of supply and faces downward sloping demand. It prices where marginal revenue equals marginal cost to maximize profits.
4) Oligopoly is dominated by a few interdependent firms. Pricing depends on factors like rivals' prices, advertising
This document summarizes the key aspects of monopolistic competition. It was prepared by Dipak Mer and Swati Parmar for MK Bhavnagar University. The founding theorist of monopolistic competition was Edward Chamberlin, who described it in his 1933 book. Monopolistic competition involves many producers selling differentiated but substitutable products. Firms have some degree of market power but also face competition. In both the short and long run, firms will adjust output and prices to maximize profits or minimize losses. The model of monopolistic competition is compared to perfect competition, with outcomes including excess capacity and markups over marginal cost under monopolistic competition.
The document summarizes different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly. It defines each structure and provides examples of characteristics like number of sellers, product differentiation, barriers to entry, profit levels, and pricing behavior. Perfect competition has many small sellers of identical products, while monopoly has a single seller of unique products. Monopolistic competition and oligopoly involve intermediate levels of competition between differentiated products.
This document provides an overview of market structures including monopolistic competition and oligopoly. It discusses key characteristics of each structure such as product differentiation, barriers to entry, and interdependence between firms. The document also covers concepts like profit maximization, loss minimization, long-run equilibrium, price rigidity, game theory, and Nash equilibrium which are important for understanding firm behavior under different market conditions.
1) Monopolistic competition is an imperfect market structure between perfect competition and monopoly. It is characterized by many small businesses that sell differentiated products that are close substitutes for one another.
2) Firms have some control over prices under monopolistic competition. While there are many buyers and sellers, product differentiation gives firms some monopoly power over their brand.
3) In both the short run and long run, a monopolistically competitive firm will be in equilibrium when marginal revenue equals marginal cost, allowing the firm to maximize its profits. In the short run, firms can earn supernormal profits if price is above average cost.
There are several methods that oligopolistic firms use to set prices. Cost-based pricing sets price based on average costs, with some markup added. Competition-based pricing matches prices of similar products already on the market. Demand-based pricing considers how demand responds to price changes, allowing for perceived-value pricing and price discrimination between market segments. Strategy-based pricing for new products involves either price skimming to extract high prices from early adopters or penetration pricing at low initial prices to gain market share. Firms typically combine multiple pricing methods rather than relying on just one.
Market structure identifies how competitive a market is based on factors like the number of firms, degree of product differentiation, barriers to entry, and firms' pricing power. Markets range from perfect competition, where many small firms have no pricing power and entry is easy, to monopoly, where a single firm controls the entire market. Between these extremes are monopolistic competition, oligopoly, and duopoly, where firms have some degree of pricing power and influence over each other. The model used depends on the characteristics of the specific industry.
Market structure identifies how competitive a market is based on factors like the number of firms, degree of product differentiation, barriers to entry, and firms' pricing power. Markets range from perfect competition, where many small firms have no pricing power and entry is easy, to monopoly, where a single firm controls the entire market. Between these extremes are monopolistic competition, oligopoly, and duopoly, where firms have some degree of pricing power and influence over each other. The model used depends on the characteristics of the specific industry.
The document discusses market structure under perfect competition. It begins by defining key terms like market, market structure, and the two types of market structures - perfect competition and imperfect competition.
Under perfect competition, the market has several characteristics - homogeneous products, free entry and exit of firms, perfect information, and firms being price takers. The demand curve for an individual firm is horizontal, as it is a price taker. Equilibrium occurs where MR=MC and firms earn only normal profits in the long run. Changes in demand or supply can shift the equilibrium.
The document then discusses monopoly as an example of imperfect competition. Under monopoly there is a single seller, barriers to entry, no close substitutes, and
II.) Monopolistic competition is characterized by many small businesses that produce differentiated products with weak barriers to entry. In the short run, firms behave similarly to monopolies by producing where marginal revenue equals marginal cost. However, in the long run competition drives economic profits to zero as entry and exit occurs. While monopolistic competition provides variety for consumers, it is less efficient than perfect competition due to excess capacity and markups pricing above marginal cost.
The document provides an introduction to the theory of the firm, which attempts to explain how firms behave under different market conditions. It discusses three market structures - perfect competition, oligopoly, and monopoly. The theory of the firm includes production theory, cost theory, revenue theory, and profit maximization in different market types. It evaluates the market structures based on efficiency and welfare criteria.
Monopolistic practices and the role of competition commissions in the Indian economy. There are many sellers of differentiated products, free entry and exit in the market, and each firm faces a downward sloping demand curve (Monopolistic Competition). The Competition Commission of India prohibits anti-competitive agreements and abuse of dominant positions to promote efficiency, productivity, choice and reduce costs. Advertising is used by firms in monopolistic competition to attract customers to differentiated products and establish brand names as a signal of quality.
This document provides an overview of imperfect competition, specifically monopolistic competition and oligopolies/duopolies. It begins with definitions and key characteristics of these market structures. Monopolistic competition is described as having many firms that produce differentiated products and face elastic demand curves. Firms engage in non-price competition through advertising and branding. The document uses hotels as an example. Oligopolies and duopolies are described as having only a few firms, where each firm's decisions significantly impact competitors. Game theory is used to demonstrate mutual dependence between firms. The tendency for collusion but its illegality is also discussed.
Monopolistic competition is a market structure with many small businesses that sell differentiated products with some level of price-setting power in the short run. In the long run, free entry and exit of businesses leads to normal profits. Key features include differentiated products, free entry and exit of businesses, and price-taking behavior in the long run. Examples include restaurants, hairdressers, and clothing brands. The model assumes businesses are productively and allocatively inefficient in the short run but can achieve dynamic and X-efficiency in the long run. New trade theory explains international trade patterns using the concept of monopolistic competition.
Monopolistic competition is characterized by many small firms that produce differentiated products. In the short run, firms can earn economic profits by producing at a quantity where marginal revenue equals marginal cost. However, in the long run, free entry and exit causes the demand curve to shift left as more firms enter, eliminating economic profits and resulting in normal profits for firms. Firms produce at the minimum point of their average total cost curve where price equals average cost.
This document discusses different market structures including imperfect competition. It provides examples of monopolistic competition, oligopoly, and monopoly. For monopolistic competition, it describes characteristics like differentiated products, freedom of entry/exit, and firms having control over prices while facing downward sloping demand curves. For oligopoly, it notes the interdependence between a small number of firms. The document also discusses the Cournot model of duopoly and provides the De Beers diamond cartel as an example of collusion between firms.
There are several types of market structures that can exist based on the level of competition. Perfect competition occurs when many small firms produce identical goods and all firms and consumers have perfect information. Monopolies exist when there is only one seller of a unique product with no close substitutes and barriers to entry prevent competition. Oligopolies are markets with only a few large firms where the actions of one firm impact others. Monopolistic competition involves many firms with differentiated but similar products and free entry/exit in the long run.
This document summarizes key characteristics of monopolistic competition. In 3 sentences: Firms in monopolistic competition have differentiated but substitutable products, they set price between the monopoly and competitive levels where marginal revenue equals marginal cost to earn normal profits in the long run, and while this leads to higher prices than perfect competition it provides benefits to consumers like variety and innovation.
The document discusses different market structures including perfect competition, monopoly, oligopoly, and monopolistic competition. It describes the key characteristics of each structure such as the number of firms, product differentiation, barriers to entry, and firm behavior. Perfect competition has many small firms, identical products, and firms are price takers. A monopoly has a single dominant firm with barriers to entry. Oligopoly is dominated by a small number of large firms where behavior is interdependent. Monopolistic competition has many differentiated products and easy entry/exit.
This document provides 33 questions and answers related to managerial economics concepts. Key topics covered include:
1. Definitions of production, short run and long run production, production functions and their assumptions.
2. The law of variable proportions, isoquants and their types, economies of scale, costs and cost of production.
3. Sunk costs, short run and long run cost functions, and why long run average cost curves are L-shaped.
4. Market structures including perfect competition, monopoly, oligopoly, monopolistic competition, and their characteristics.
5. Pricing under different market structures, monopoly power, bilateral monopoly, normal and super-normal profits, and
The document discusses different types of efficiency that should be used when answering exam questions:
1) Allocative efficiency occurs when the price consumers pay equals the marginal cost of production, ensuring resources go to their most valued uses. Productive efficiency means output is produced at minimum average cost through optimal inputs, technology, and scale.
2) Dynamic efficiency focuses on improving quality, variety, and innovation over time through R&D, human capital investment, and competition.
3) Social efficiency maximizes social welfare by equalizing social marginal benefits and costs, requiring markets to account for externalities. X-inefficiency refers to businesses using more inputs than needed due to lack of competition.
The document provides
Monopolistic competition describes a market structure with many small businesses that sell differentiated but similar products. While firms compete on price, they also engage in non-price competition through product differentiation, branding, and advertising. In the short run, firms maximize profits by producing where marginal revenue equals marginal cost. In the long run, free entry and exit causes average costs to equal prices as firms earn zero economic profit.
Monopolistic competition is characterized by many small businesses that sell differentiated products. While products are similar, firms act independently due to product differences. In the short run, firms maximize profits where marginal cost equals marginal revenue. In the long run, easy entry forces firms to earn only normal profits as new firms enter and demand curves shift. Monopolistic competition provides variety but leads to excess capacity and inefficiencies as firms overproduce and costs are higher than under perfect competition.
Monopolistic competition was developed in 1933 by Edward Chamberlin and Joan Robinson. It is a type of imperfect competition where there are many small firms that produce differentiated products. Firms have some control over prices and can influence the market but still face competition from other differentiated products that are close substitutes. In the long run, firms will earn normal profits and operate at the minimum point of their long-run average cost curve under monopolistic competition.
This document provides summaries of presentations on business economics topics by various students:
1. Priya Khandelwal presented on the characteristics of oligopoly markets and kink demand curves.
2. Priska Haria discussed short and long run equilibrium in monopolistic competition.
3. Mohit Joshi covered short and long run equilibrium in monopoly markets.
4. Divit Dholabhai presented on different market structures like perfect competition, monopoly, oligopoly, and monopolistic competition.
5. Ayush Chaudhary summarized the concept of break even point in economics.
The document discusses monopolistic competition in the toothpaste market using Crest toothpaste as an example. It notes that while Procter & Gamble has monopoly power over Crest, their power is limited because consumers can easily substitute other brands if the price rises too much. The demand for Crest is downward sloping but fairly elastic. As a result, Procter & Gamble will charge a price only slightly higher than their marginal cost.
Monopolistic competition - The Four Types of Market Structure - EconomicsFaHaD .H. NooR
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another (e.g. by branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms.[1][2] In the presence of coercive government, monopolistic competition will fall into government-granted monopoly. Unlike perfect competition, the firm maintains spare capacity. Models of monopolistic competition are often used to model industries. Textbook examples of industries with market structures similar to monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in large cities. The "founding father" of the theory of monopolistic competition is Edward Hastings Chamberlin, who wrote a pioneering book on the subject, Theory of Monopolistic Competition (1933).[3] Joan Robinson published a book The Economics of Imperfect Competition with a comparable theme of distinguishing perfect from imperfect competition.
Monopolistically competitive markets have the following characteristics:
There are many producers and many consumers in the market, and no business has total control over the market price.
Consumers perceive that there are non-price differences among the competitors' products.
There are few barriers to entry and exit.[4]
Producers have a degree of control over price.
economics #ucp
What is 'Monopolistic Competition'
Characterizes an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in the industry are low, and the decisions of any one firm do not directly affect those of its competitors. All firms have the same, relatively low degree of market power; they are all price makers. In the long run, demand is highly elastic, meaning that it is sensitive to price changes. In the short run, economic profit is positive, but it approaches zero in the long run. Firms in monopolistic competition tend to advertise heavily.
BREAKING DOWN 'Monopolistic Competition'
Monopolistic competition is a middle ground between monopoly, on the one hand, and perfect competition (a purely theoretical state), on the other, and combines elements of each. It is a form of competition that characterizes a number of industries that are familiar to consumers in their day-to-day lives. Examples include restaurants, hair salons, clothing and consumer electronics. To illustrate the characteristics of monopolistic competition, we'll use the example of household cleaning products.
This document provides an overview of imperfect competition and its various forms, including monopolistic competition and oligopoly. It discusses key characteristics of each market structure type, such as the number of firms, ability to influence price, and entry barriers. Examples are given for each type. The essential difference between perfectly and imperfectly competitive firms is explained. Short-run profit maximization is demonstrated for monopolistic competition and monopoly. Demand curves are illustrated for the individual firm under monopolistic competition and monopoly.
This document provides an overview of imperfect competition. It discusses the key characteristics of monopolistic competition, oligopoly, and monopoly market structures. For each structure, it outlines the number of firms, ability to affect price, entry barriers, and examples. The document then examines pricing decisions under imperfect competition and provides examples of the De Beers cartel, which dominated the global diamond industry through controlling supply. In summary, the document analyzes different forms of imperfect competition and pricing models.
Innovation Academy October 28th, 2014 finalCorey Topf
The document outlines the strategies and curriculum of Roosevelt Innovation Academy. It describes an interdisciplinary approach that focuses on innovation, collaboration, and real-world projects. Students take a combination of standard courses along with specialized classes in subjects like media arts, design, and entrepreneurship. The goal is to develop students into "T-shaped learners" with both broad and deep skills who are prepared for universities seeking leaders in innovation.
IA Parent Presentation - March 27th, 2014Corey Topf
The document appears to be from I Innovation Academy A, which outlines its mission to empower students to pursue learning and create socially responsible solutions. It includes information about various grade levels, courses, quotes from students about learning, and responses from university representatives indicating that IA students would be a good fit for their institutions which value hands-on, interdisciplinary and entrepreneurial learning approaches.
This document describes the Innovation Academy, which uses an experiential learning model. It focuses on project-based and student-led learning through real projects that serve the community. Students collaborate with peers, experts, and local companies. They complete internships and independent projects. The Academy aims to empower students to pursue passion for learning and create socially responsible solutions.
The document describes an Innovation Academy program. It provides details on the academy's mission to empower student learning and social responsibility. The academy focuses on experiential and project-based learning, with students spending time each week on real-world projects in areas like journalism, public speaking, finance, internships, and independent work. Students collaborate with experts and other schools. Assessment is through formative feedback, self-assessment, and evaluation from authentic audiences. The academy aims to prepare students for university and careers through hands-on learning and experiences.
The document appears to be a presentation about the Innovation Academy, which is described as a hands-on business and entrepreneurship program that empowers students through real-world projects. It discusses key aspects of the program, including that it is student-led, focuses on skills over content, and has students work on major projects one at a time. Students spend their Mondays and Thursdays on projects while also taking traditional classes. The presentation provides examples of different types of projects students might work on and emphasizes that the program involves real collaborations, field trips, feedback, and visibility for students' work.
Daniela Delgado wrote an article titled "Changing My Stance" where she reflected on pursuing new activities and interests like karate, ballet, singing, and violin. She discussed wanting to challenge herself, reach higher goals, and make an impact like her role model Miley Cyrus. Daniela wrote about maintaining good grades to achieve academic honors and strengthen her college applications, with the goal of acceptance and serving others.
This document discusses various financial literacy topics including the time value of money, investing $3,000, brokerage firms, compound interest, stocks, bonds, mutual funds, exchange-traded funds (ETFs), stock market indexes, and initial public offerings (IPOs). It provides examples, questions, and explanations about these key concepts.
CAS is a requirement for the IB diploma that requires students to engage in extracurricular activities in three categories: creativity, activity, and service. It is meant to provide students opportunities to pursue passions, try new activities, and develop holistically outside the classroom. Students must choose a range of relevant activities, set goals for each, and meet eight learning outcomes through reflection and evidence uploaded to the Managebac platform. CAS can be seen as either a burden or chance by students, so finding a balanced approach is important.
The document summarizes the key aspects of the CAS (Creativity, Activity, Service) requirement for IB Diploma students. It explains that CAS involves choosing a range of activities to pursue over the two years, setting goals for each, and meeting eight learning outcomes. Students must reflect on their progress regularly and keep evidence and reflections logged on the Managebac platform. Two opposing views of CAS are presented: some see it as a burden while others view it as a chance to pursue passions. Proper balance is key to success. Regular, ongoing reflections logged on Managebac by deadline dates are needed to meet the CAS requirements.
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Gabriella Silva completed various activities to fulfill her IB CAS requirements over the past two years. These included participating in a leadership retreat to improve communication skills, organizing social events as part of the Peruvian Social Studies Club, and teaching math to students in Peru. Through these experiences, she developed skills in areas like communication, leadership, time management, and teaching. She also undertook new challenges, planned activities, worked with others, showed commitment, considered ethics, and developed an awareness of her strengths and areas for growth. Overall, the CAS experiences helped her grow as a leader, learner, and individual.
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1. Theory of the Firm
Section 2.3 HL
Discuss the following with the person next to you:
•What is the difference between profit and revenue?
•Come up with concrete examples of:
- Monopolies
- Oligopolies
- Monopolistic Competition
- Perfect Competition
• What is the goal of a firm?
2. Unit 2.3 - Theory of the Firm
Introduction to the Four Market Structures
Most competition Least competition
Pure (or Perfect) Monopolistic Oligopoly Monopoly
Competition competition
VERY large number of firms A few large firms Only ONE firm. The
Fairly large number of
dominate an industry firm IS the industry!
firms
Each firm is so small that
changes in its own output do A change in one firm's Significant barriers to
Firms are small relative to
not affect market price, i.e. output has significant entry exist,
the industry, meaning
firms are price takers impact on the market preventing new firms
changes in one firms
price, firms are price- from entering and
output have only a slight
Firms all produce identical makers. competing with the
impact on market price
products, with no monopolist
differentiation Products can be iden-
Products are slightly
tical (such as oil) or
differentiated. Firms will the Monopolist can
Completely free entry and differentiated (such as
advertise to try and maintain significant
exit from the industry, i.e. Macs and Dells)
further differentiate profits due to the lack
NO barriers to entry. product. Branding!
There are significant of competition.
Advertising!
All producers and barriers to entry
consumers have perfect Changes in the firm's
No barriers to entry, firms
knowledge of prices, costs, Firms will likely use output cause changes
can enter or leave easily
and quality and availability advertising to try and in the price, i.e. the
of products differentiate their firm is a price-maker!
products from
competitors'
3. Unit 2.3 - Theory of the Firm
Introduction to the Four Market Structures
Examples of different market structures: Based on the characteristics of the different market structures,
brainstorm examples of each.
Pure Monopolistic Oligopoly Monopoly
Competition competition
Practice: Different types of Market Structure - NCEE Activity 24
4. Unit 2.3 - Theory of the Firm
Unit Overview
Unit 2.3.1 - Introduction to Market Structures Long-run
and Cost Theory ·Economies of scale
·Diseconomies of scale
Intro to Market Structures ·Long-run cost curves
·Pure competition
·Monopolistic competition Revenues
·Oligopoly ·Total revenue
·Monopoly
·Marginal revenue
·Average revenue
Cost theory
·Types of costs: fixed costs, variable costs
·Total, average and marginal costs Profit
·Accounting costs = opportunity costs = economic ·Distinction between normal (zero) and
costs supernormal (abnormal) profit
·Profit maximization in terms of total revenue
Short-run and total costs, and in terms of marginal
·Law of diminishing returns revenue and marginal cost
·Total product, average product, marginal product ·Profit maximization assumed to be the main
·Short-run cost curves goal of firms but other goals exist (sales volume
maximization, revenue maximization,
environmental concerns)
Blog posts: “Economies of Scale” Blog posts: "Costs of Production"
Blog posts: "Productivity" Blog posts: “Law of Diminishing Returns”
5. Unit 2.3 - Theory of the Firm
Unit Overview
2.3.2 - Perfect competition Efficiency in monopoly
·Assumptions of the model ·Price discrimination
·Demand curve facing the industry and the firm in >>Definition
perfect competition >>Reasons for price discrimination
·Profit-maximizing level of output and price in the >>Necessary conditions for the practice of price
short-run and long-run discrimination
·The possibility of abnormal profits/losses in the >>Possible advantages to either the producer or
short-run and normal profits in the long-run the consumer
·Shut-down price, break-even price
·Definitions of allocative and productive efficiency 2.3.4 - Monopolistic competition
·Efficiency in perfect competition ·Assumptions of the model
·Short-run and long-run equilibrium
2.3.3 - Monopoly ·Product differentiation
·Assumptions of the model ·Efficiency in monopolistic competition
·Sources of monopoly power/barriers to entry
·Natural monopoly 2.3.5 - Oligopoly
·Demand curve facing the monopolist ·Assumptions of the model
·Profit-maximizing level of output ·Colusive and non-collusive oligopoly
·Advantages and disadvantages of monopoly in ·Cartels
comparison with perfect competition ·Kinked demand curve as one model to describe
interdependent behavior (IB HL only)
·Importance of non-price competition
·Theory of contestable markets (IB HL only)
6. Costs of Production
Big Ideas
Important questions:
1) What is productivity and how does it change as resources
(LAND, LABOR, CAPITAL) are added to production?
2) What are the different costs faced by firms in the short-run and
the long-run?
3) What is the relationship between the productivity of its
resources and the costs faced by a firm?
4) Why does understanding productivity and costs matter to firms?
Discussion Question: What is productivity, and why
do firms care about it?
Blog posts: "Productivity"
7. Costs of Production
Law of Diminishing Returns
Understanding Productivity:
Productivity (OUTPUT) : The amount of output attributable to a unit of
input. Examples of productivity:
"Better training has increased the productivity of workers"
"The new robot is more productive than older versions"
"Adding fertilizer has increased the productivity of farmland"
Total prod. (TP or TO) is the total output of a particular firm
Example of TP: "After hiring more workers the firm's total product
increased."
Marginal prod. of labor (MPL) is the change in total product resulting from each
additional worker.
>>MPL = ∆TP/∆L
Average prod. of labor (APL) is the output, on average, by each
worker
>>APL = TP/units of L
8. Costs of Production
Law of Diminishing Returns
Law of Diminishing Returns:states that as additional units of a variable resource
are added to fixed resources, beyond some point the marginal product of the
variable resource will decline.
HUH? Let's illustrate this with an example
Example: Paper Chain Factory
Instructions:
1) Use inputs (land, labor and capital) to create a product (paper chains)
2) Labor is the only variable resource. Land and capital are fixed.
3) Production rounds last one minute
4) Record production data in a data table
LAND (fixed) LABOR (variable) CAPITAL (fixed)
9. Costs of Production
Law of Diminishing Returns
Units of labor TP MP AP
One worker has one minute
to make the longest chain
possible. 0
A volunteer is needed to 1
record output data in the
2
table to the right.
3
As more workers are added,
TP, MP and AP will be 4
calculated and recorded.
5
MP = ∆TP/∆L
L
6
AP = TP/units of L
L 7
8
10. Costs of Production
Law of Diminishing Returns
MP/ 9 Marginal/Average Product
AP 8
7 Data:
6
Units of labor TP MP AP
5
4 0
3
2
1
1
2
0
-1 1 2 3 4 5
3
-2
4
TP 18 Total Product
16
5
14
12 6
10
7
8
6 8
4
2
0 1 2 3 4 5
Units of Labor
11. Costs of Production
Law of Diminishing Returns
Marginal/Average Product
MP/AP
Observations:
Diminishing
returns sets in
Describe what happens to TP as more and more
labor is added to a fixed amount of capital and land
TP increases at an increasing rate as workers' MP
AP
increases, at a decreasing rate as MP falls, and
declines as MP becomes negative.
MP What is the relationship between TP and MP?
0 10 20 30 40 50
Units of Labor MP is the rate of increase in TP
TP Total Product
What is the relationship between MP and AP?
When MP is greater than AP, AP increases. MP
intersects AP at its highest point, and when MP is
TP less than AP, AP decreases
MP becomes negative,
TP begins to fall
Why does a producer care about the productivity of i
workers and other resources?
Because firms’ average and marginal costs in
0 10 20 30 40 50 the short-run are inversely related to the
Units of Labor productivity of its workers
12. Costs of Production
Law of Diminishing Returns
Conclusions:
·Explanation of increasing returns :
·Explanation of diminishing returns:
·Negative marginal product and implications:
·Implications of diminishing marginal returns to producers:
Blog posts: “Law of Diminishing Returns”
13. Costs of Production
Marginal/Average Product
Law of Diminishing Returns
MP/ 9
Posters for Econ.
AP 8
7 Data:
6 Units of labor TP MP AP
5
0 0
4
3
1 6
2
1 2 14
0
-1 1 2 3 4 5 3 21
-2
4 24
TP 18
Total Product
16 5 20
14
12
10
8
6
4
2 Fill in the chart and the graphs above.
0 1 2 3 4 5
Where is the law of diminishing
Units of Labor returns?
14. Costs of Production
Productivity and costs
Productivity and Costs: As worker productivity increases, firms get "more for
their money", meaning per-unit and marginal costs decrease. When productivity
decreases, costs increase.
Discussion: When productivity of workers is
Costs and Productivity rising, firms costs are falling, since they're
getting more output for workers while paying
MC them the same wages.
Product/costs
·When marginal product is increasing
(increasing returns) marginal cost is falling
AP ·When MP is at its maximum, MC is at its
minimum
AC
·When diminishing returns set in, MP begins
falling and MC begins rising
·MP intersects average product at its highest
MP point, and MC intersects average total cost at its
lowest point
Units of Labor/
units of output
Summary: Increasing marginal returns is reflected in a declining marginal cost, and
diminishing marginal returns in a rising marginal cost!
15. Costs of Production
Short-run Costs of Production
What is the short-run? "the fixed-plant period"
The short-run is the period of time over which a firm's plant size is fixed.
Capital cannot and land cannot be varied, labor is the only variable
resource. To increase output in the short-run, a firm can only increase
inputs of labor, not the other resources.
Total Costs:
Total fixed costs (TFC): These are the costs a firm faces that do not
vary with changes in short-run output. Could include rent on factory
space, interest on capital (already acquired).
Total variable costs (TVC): These are the costs a firm faces which
change with the level of output in the short-run. Could include
payment for raw materials, fuel, power, transportation services,
wages for workers, etc...
Total cost:TFC + TVC at each level of output
16. Costs of Production
Short-run Costs of Production
Resource costs in the short-run:
Rent - the payment for land: Rent is fixed in the short-run since firms cannot add this
resource to production. Rents must be paid regardless of the level of the firm's output.
Interest - the payment for capital: Interest is fixed in the short-run since firms cannot
add this resource to production. Interest must be paid on loans regardless of the level of
the firm's output.
Wages - the payment for labor: Wages are variable in the short-run, since firms can hire
or fire workers to use existing land and capital resources. Wage costs increase when new
workers are hired, and decrease when workers are laid off.
Normal profit:the minimum level of profit needed just to keep an entrepreneur operating
in his current market. If he does not earn normal profit, an entrepreneur will direct his skills
towards another market. Normal profit is a cost because if a firm does not earn normal
profit, it is not covering its costs and may shut down.
Other short-run variable costs of production:
·Transportation costs: Firms pay lower transport costs at lower levels of output.
·Raw material costs: vary with the level of output
·Manufactured inputs: fewer parts are needed from suppliers when a firm lowers output.
17. Costs of Production
Short-run Costs of Production
Graphing total costs:
TFC: Notice that regardless of the level of output, TFC remains constant. This is because these
are costs that do not vary with output.
TVC: Notice that when output is zero, TVC is zero, because you do not need to hire any workers
or use any raw materials if you're not producing anything. As output increases, TVC continues to
increase
TC: Notice that when output is zero, TC = TFC. But once the factory begins pumping out products,
TC rises with TVC. TC is the sum of TFC and TVC, since both fixed and variable costs make up
total cost.
TC
Diminishing returns:
Costs
TVC ·Notice that TC and TVC increase at a
decreasing rate at first. This is when
marginal product is increasing as more
labor is employed (firms get "more for their
money")
·However, beyond some point, costs begin
100 TFC
to increase at an increasing rate. This is
where diminishing returns set in and MP is
decreasing. The firm is getting less
0 Point at which Q of output additional output from each worker hired,
diminishing
returns sets in but must pay the same wages regardless.
(The firm gets "less for its money")
18. Costs of Production
Short-run Costs of Production
Average Costs:
Average fixed cost:AFC=TFC/Q
AFC will decline as output rises, never increases. This is because the fixed cost
(which never goes up) is “spread out” as output goes up. This is called “spreading
the overhead”
Average variable cost:AVC = TVC/Q
For simplicity, we will assume that labor is the only variable input, the labor cost per
unit of output is the AVC
Average total cost:ATC = TC/Q
Sometimes called unit cost or per unit cost. ATC also equals AFC + AVC
Marginal Cost = the additional cost of producing one more unit of
output.
MC = ∆TVC/∆Q.
19. Theory of the Firm
Section 2.3 HL
Price
Quantity of output
Draw a graph to represent revenue and explain it.
20. Costs of Production
Short-run Costs of Production
Graphing Average and Marginal Costs:
AFC: it declines as output increases. This is called "spreading the overhead".
ATC and AVC: At first they are declining as output increases. This is during the stage when MP is
increasing, since new labor is making better use of capital and beginning to specialize.
AVC: When AVC is at its minimum, average product is at its maximum, meaning workers are producing
the most output per worker. As more workers are added, average product begins to go down, and AVC
begins to rise.
Costs
Short-run Costs Things to notice:
·the vertical distance between ATC and
AVC equals the AFC at each level of
MC output.
ATC
·MC intersects both AVC and ATC at their
minimum. This is because if the last unit
AVC
produced costs less than the average,
then the average must be falling, and vis
versa (just like your test scores!)
AFC
·MC is at its minimum when MP is at its
Point at which Q maximum, because beyond that point
diminishing
returns sets in
diminishing returns sets in and the firm
starts getting less for its money!
21. Costs of Production
Short-run Costs of Production
Labor is the only variable resource and the wage = $200 / week
Rent and interest are fixed costs, and = $400 / week
QL TP (Q TFC TVC TC AFC AVC ATC MC
supplied
)
0 0 400
1 10
2 25
3 45
4 70
5 90
6 105
7 115
8 120
Describe and explain what happens to each of the following as output increases:
1) TFC 2) TC 3) AFC 4) AVC and ATC 5) MC
22. Costs of Production
Short-run Costs of Production
Labor is the only variable resource and the wage = $200 / week
Rent and interest are fixed costs, and = $400 / week
QL TP (Q TFC TVC TC AFC AVC ATC MC
supplied
)
0 0 400
1 10
2 25
3 45
4 70
5 90
6 105
7 115
8 120
Describe and explain what happens to each of the following as output increases:
1) TFC 2) TC 3) AFC 4) AVC and ATC 5) MC
23. Costs of Production
Short-run Costs of Production
Costs
Short-run Costs
Discussion Questions: Short-run Costs
MC
ATC
AVC
1) State the law of diminishing returns
and explain how it determines the
AFC
shape of the marginal cost curve.
Q
TC
Costs
TVC 2) Explain the relationship between the
marginal cost curve and the average
variable and average total cost curves.
3) What determines the distance
TFC
between the ATC and the AVC at a
Point at which
particular level of output.
Q
diminishing
returns sets in
24. Costs of Production
Short-run vs. Long-run costs
Long-run is the variable plant period, meaning that firms can open up new plants, add
capital to existing plants, or close plans and remove capital if need be.
Economies of scale: are the cost advantages that a business obtains due to
expansion. As new plants open, ATC declines. WHY?
·better specialization, division of labor, bulk buying, lower interest on loans,
lower per unit transport costs, larger and more efficient machines, etc...
Also called "Increasing returns to scale"
Minimum Efficient Scale (MES): The minimum level of output a firm must
achieve to achieve the lowest average total cost.
Diseconomies of Scale: When a firm becomes "too big for its own good" it
experiences diseconomies of scale. Continuing to add plants and increase output
causes ATC to rise. WHY? Mostly due to control and communications problems,
trying to coordinate production across a wide geographic area may make firm less
efficient.
Also called "Decreasing returns to scale"
Blog posts: “Economies of Scale”
25. Theory of the Firm
Section 2.3 HL
Define economies of scale in your own
words and explain why they are
possible.
You may use your notes but not your
book.
26. Costs of Production
Short-run vs. Long-run costs
Graphing long-run ATC: The gray curves represent all the SR ATC
curves the firm experiences as it opens new plants. As it opens its first
10 plants, ATC declines, while for plants 11-16 ATC remains constant.
Costs
Beyond 16 plants the firm's ATC begins to rise, indicating it has gotten
too big.
ATC LR
Economies Diseconomies
of scale of scale
Constant returns
to scale
MES
Q
Blog posts: "Economies of Scale"
27. FIXED COST (FC)
VARIABLE COST (VC)
Costs TOTAL COST (TC)
Quantity of output