MGMT 4A Lecture Notes - Lecture 1: Economic Surplus, Deadweight Loss, Pareto Efficiency
Document Summary
Industry structure will in large part determine the conduct of the individual firms and actors in a given industry and this conduct will, in turn, determine market performance. Number of firms, size of firms, cost structure, division of marketshare. Strategies to exploit advantages from imperfect competition. Perfect competition is the market structure by which economists measure all other market structures. Most productively and allocatively efficient type of market structure. Price taker: a firm can change its rate of production and sales w/o having any impact on the market price. Marginal revenue: additional revenue earned by the firm from the sale of one additional unit. Homogenous product: product such that each firm"s output is indistinguishable from other firm"s output. When prices and profits rise, additional firms can freely enter/exit the industry. Barriers to entry: key patents, large capital requirement, and resource ownership.
