ECON101 Lecture Notes - Lecture 9: One Unit, Market Power, Perfect Competition
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Chapter 8: (cid:862)price and output determination: pure competition(cid:863) Purpose of chapter: to understand the rationale underlying pricing and output decisions of a firm in a perfectly competitive industry. Market structure: number of firms in the industry. Gives us a good idea bout of the level of monopoly power that"s availa(cid:271)le in this particular industry: similarity of products (goods and services) Is the produ(cid:272)t ho(cid:373)oge(cid:374)eous (cid:894)i. e. (cid:272)or(cid:374) a(cid:374)d (cid:272)e(cid:373)e(cid:374)t(cid:895) or is it like tv"s or automobiles, which have all different kinds of models: knowledge of the markets by key players. Do they have a lot of information or no information: ease of entry and exit in the industry. Characteristics of a perfectly competitive market: large number of buyers and sellers of the product. No one seller can influence the price of the good in question. Too small: ho(cid:373)oge(cid:374)eous produ(cid:272)t (cid:894)i. e. agri(cid:272)ulture, they"re alike(cid:895)