Study Guides (248,605)
United States (123,456)
Boston College (3,492)
Economics (366)
ECON 1131 (105)
All (56)

Complete Principles of Economics I/Microeconomics Notes Part 7 - Got 93% in the course!

2 Pages
125 Views

Department
Economics
Course Code
ECON 1131
Professor
All

This preview shows 80% of the first page. Sign up to view the full 2 pages of the document.
Description
Microeconomics Notes: Chapter 2 Keely Henesey Four Market Models ­ Imperfect Competition: o  Pure Monopoly : one firm is the sole seller of product  Entry of additional firms are blocked  Product differentiation isn’t an issue because they are producing a single unique  product o  Monopolistic Competition : relatively large number of sellers producing differentiated  products  Widespread nonprice competition (product is distinguished based on attributes like  design/workmanship; NOT price)  Entry/Exit is pretty easy o  Oligopoly : only a few sellers of a standardized OR differentiated product; each firm is  affected by the decisions of the other firms and must take them into account in determining its  own price and output ­  Pure Competition : large number of firms producing a standardized product o New firms can enter/exit easily Pure Competition: Characteristics & Occurrence ­ Very Large Numbers  ▯large number of sellers; large market ­ Standardized Product  ▯identical/homogeneous product o Buyers view products from firms B, C, D, & E as perfect substitutes for the product of firm A  o If price is constant across all firms, buyers are indifferent to which firm the buy from ­ Competitive Firms Are “Price Takers”  ▯cannot influence market price; can only adjust to it  [ at the  mercy of the market] o WHY? Each firm produces such a small fraction of total output that their own personal  production decisions will not perceptibly influence total supply or, therefore, product price ­ Free Entry & Exit  ▯it’s easy; no significant obstacles prohibit new firms from selling output in  competitive market (legal/technological/financial) Demand as Seen by a Purely Competitive Seller ­ Demand faced by entire competitive market is NOT perfectly elastic o By acting independently, but together, firms can increase or decrease price (through changes  in output) o Individual Firm Can’t  ▯ output is too small a fraction of total output  ­ Individual Firm: o Demand curve is perfectly elastic [straight, horizontal line] o Demand Curve = Average Revenue = Marginal Revenue   AR : revenue per unit  • [AR=Price] in purely competitive model (because demand curve is  perfectly elastic)   MR : change in total revenue that results from selling one more  MR=P  in pure competition o Total revenue increases by constant amount with each extra unit sold ¿ P∙Q   TR  S    ▯ ∴  SLOPE IS CONSTANT Profit Maximization in the Short Run: Two Approaches ­ Purely competitive firm attempts to maximize its economic profit (or minimize its economic loss) by  adjusting its output Micro
More Less
Unlock Document

Only 80% of the first page are available for preview. Some parts have been intentionally blurred.

Unlock Document
You're Reading a Preview

Unlock to view full version

Unlock Document

Log In


OR

Join OneClass

Access over 10 million pages of study
documents for 1.3 million courses.

Sign up

Join to view


OR

By registering, I agree to the Terms and Privacy Policies
Already have an account?
Just a few more details

So we can recommend you notes for your school.

Reset Password

Please enter below the email address you registered with and we will send you a link to reset your password.

Add your courses

Get notes from the top students in your class.


Submit