ECON 2030 Lecture Notes - Marginal Cost, Market Structure, Monopolistic Competition
Document Summary
Today"s menu: monday 23 june 2014: business, practice problems, chapter 13: 1, 2, 5, 7, 8, 11, 15-17, 21, chapter 14: 1-4, 7-10, 12, 13, second exam: this thursday. Substance: perfect competition, market structure selling at, many small buyers and sellers, homogeneous good, perfect information: buyer knows what price other sellers are, no barriers to entry/exit: anyone can enter or exit the market. Where mr = mc: case 1: p > atc, equilibrium quantity, profit: positive profit ( > 0 , absolute best situation. Depends on profits: equilibrium quantity, profit < 0, stay in business to minimize losses in the short run. Once economic profits = 0, there will be no incentive to enter the market anymore. Decrease in number of sellers means decrease in supply, which means price goes up, means q* in market goes down, means profit is going up until profit = 0 in the lr because they started at less than 1.
