BUS 207 Lecture Notes - Lecture 6: Import Quota, Market Failure, Free Rider Problem

• School: Simon Fraser University
• Department: Business Administration
• Course: BUS 207
• Professor: Karen Ruckman

Document Summary

In s/r, firms earn many profits/losses: (cid:1618) profit encourages entry. In the end, we have more firms and more q being made overall but individual firms produce less than before. If p1 < p < p2 losses will be partially covered: b/c atc > avc, (cid:449)ill sustai(cid:374) losses (cid:271)/(cid:272) (cid:272)o(cid:448)er fc, keep operating. If p2 > p losses do not cover avc so shit down. L/r response entry will shift the s curve & force p down so no econ profits are earned: all firms will operate @ cost of minimum l/r ac, deciding to enter/exit: L/r profits for monopolistic comp: new entrants will still enter the market & force profits to 0, p = mr = mc = ac = atc. Intro: perf comp = forces firms to produce @ lowest cost & sell @ lowest p (to attract buyers)