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    Managerial Economics in A Global Economy: Market Structure: Perfect Competition, Monopoly and Monopolistic Competition

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    KY Koo

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    Managerial Economics in A Global Economy: Market Structure: Perfect Competition, Monopoly and Monopolistic Competition

    Uploaded by

    KY Koo
    73 views24 pages

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    Ch09 - PPT

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    © All Rights Reserved
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    73 views24 pages

    Managerial Economics in A Global Economy: Market Structure: Perfect Competition, Monopoly and Monopolistic Competition

    Uploaded by

    KY Koo

    Copyright:

    © All Rights Reserved
    Download as PPT, PDF, TXT or read online from Scribd
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    Managerial Economics in a

    Global Economy

    Chapter 9
    Market Structure: Perfect
    Competition, Monopoly and
    Monopolistic Competition

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Market Structure

    Competitive
    Less
    Perfect Competition
    Monopolistic
    Competitive

    Competition
    Oligopoly
    More

    Monopoly

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition
    • Many buyers and sellers
    • Buyers and sellers are price takers
    • Product is homogeneous
    • Perfect mobility of resources
    • Economic agents have perfect
    knowledge
    • Example: Stock Market
    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopolistic Competition
    • Many sellers and buyers
    • Differentiated product
    • Perfect mobility of resources
    • Example: Fast-food outlets

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Oligopoly
    • Few sellers and many buyers
    • Product may be homogeneous or
    differentiated
    • Barriers to resource mobility
    • Example: Automobile manufacturers

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopoly
    • Single seller and many buyers
    • No close substitutes for product
    • Significant barriers to resource mobility
    – Control of an essential input
    – Patents or copyrights
    – Economies of scale: Natural monopoly
    – Government franchise: Post office

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Price Determination

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Price Determination
    QD  625  5P QD  QS QS  175  5P
    625  5 P  175  5 P
    450  10P
    P  $45
    QD  625  5 P  625  5(45)  400
    QS  175  5 P  175  5(45)  400
    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Short-Run Equilibrium
    Firm’s Demand Curve = Market Price

    = Marginal Revenue

    Firm’s Supply Curve = Marginal Cost


    where Marginal Cost > Average Variable Cost

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Short-Run Equilibrium

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Long-Run Equilibrium
    Quantity is set by the firm so that short-run:
    Price = Marginal Cost = Average Total Cost

    At the same quantity, long-run:


    Price = Marginal Cost = Average Cost

    Economic Profit = 0
    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Perfect Competition:
    Long-Run Equilibrium

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Competition in the
    Global Economy

    Domestic Supply

    World Supply

    Domestic Demand

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Competition in the
    Global Economy
    • Foreign Exchange Rate
    – Price of a foreign currency in terms of the
    domestic currency
    • Depreciation of the Domestic Currency
    – Increase in the price of a foreign currency
    relative to the domestic currency
    • Appreciation of the Domestic Currency
    – Decrease in the price of a foreign currency
    relative to the domestic currency
    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Competition in the
    Global Economy
    R = Exchange Rate = Dollar Price of Pounds

    Supply of Pounds

    Demand for Pounds

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopoly
    • Single seller that produces a product
    with no close substitutes
    • Sources of Monopoly
    – Control of an essential input to a product
    – Patents or copyrights
    – Economies of scale: Natural monopoly
    – Government franchise: Post office

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopoly
    Short-Run Equilibrium
    • Demand curve for the firm is the market
    demand curve
    • Firm produces a quantity (Q*) where
    marginal revenue (MR) is equal to
    marginal cost (MR)
    • Exception: Q* = 0 if average variable
    cost (AVC) is above the demand curve
    at all levels of output
    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopoly
    Short-Run Equilibrium
    Q* = 500
    P* = $11

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopoly
    Long-Run Equilibrium
    Q* = 700
    P* = $9

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Social Cost of Monopoly

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopolistic Competition

    • Many sellers of differentiated (similar


    but not identical) products
    • Limited monopoly power
    • Downward-sloping demand curve
    • Increase in market share by
    competitors causes decrease in
    demand for the firm’s product

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopolistic Competition
    Short-Run Equilibrium

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopolistic Competition
    Long-Run Equilibrium
    Profit = 0

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.
    Monopolistic Competition
    Long-Run Equilibrium

    Cost with selling expenses

    Cost without selling expenses

    PowerPoint Slides by Robert F. Brooker Copyright (c) 2001 by Harcourt, Inc. All rights reserved.

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