管理经济学（英文）Ch07MarketStructurePerfectCompetition

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1、Chapter7MarketStructure:PerfectCompetitionPerfectCompetitionCharacterizedbyAlargenumberoffirmsinthemarketAnundifferentiatedproductEaseofentryintothemarketCompleteinformationavailabletoallmarketparticipantsPerfectCompetitionDistinguishedbetweenbehaviorofindividualfirmsandoutcomesforent

2、iremarketNosinglefirmhasanyinfluenceonthepriceofaproductPrice-taker:afirmcannotinfluencethepriceofitsproduct,thusitcansellanyamountofoutputatthatpricePerfectlyCompetitiveFigure7.1Industry/MarketIndividualFirm0PEQQEDSQP0Q1MCQ2ATCD=P=MRBAProfitMaximizationTC=totalcostwhereTR=totalrevenu

3、e=TR-TC=profitProfit-maximizationrule:tomaximizeprofits,afirmshouldproducethelevelofoutputwheremarginalrevenueequalsmarginalcostMarginalRevenuePriceequalsmarginalrevenueforaperfectlycompetitivefirmbecausethefirmdoesnothavetolowerthepricetosellmoreunitsofoutputTheprofit-maximizinglevel

4、ofoutputoccurswheremarginalrevenueequalsmarginalcostbecauseanyotherlevelofoutputwillresultinsmallerprofitDeterminingtheAmountofProfitEarnedIfyouknowtotalrevenueandtotalcost,youcancalculateamountofprofitUsingTRandTCfunctiongraphs,youcancalculatelevelofprofit-maximizingbyfindingthegreat

5、estdistancebetweenthetwocurvesandcalculatetheprofitatthatpointTheShutdownPointTheshutdownpointforperfectlycompetitivefirm:theprice,whichjustequalsAVC,belowwhichitismoreprofitablefortheperfectlycompetitivefirmtoshutdownthantocontinuetoproduceThesupplycurveisthatportionofitsmarginalcost

6、curveaboveminimumAVCSupplyCurveforPerfectlyCompetitiveIndustryThesupplycurveshowstheoutputproducedbyallperfectlycompetitivefirmsintheindustryatdifferentpricesThecurvewillbeflatterthanthefirm’ssupplycurvebecauseitreflectsoutputproducedbyallfirmsintheindustryateachpriceLong-runAdjustmen

7、tTwofactors:EntryandexitbynewandexistingfirmsChangesinthescaleofoperationsbyallfirmsThesefactorscanoccursimultaneouslyLong-runAdjustmentEquilibriumpointfortheperfectlycompetitivefirm:thepointwherepriceequalsATCsincethefirmearnszeroeconomicprofitatthispointEconomicprofitincorporatesall

8、impli