Perfect competition

Perfect Competition: Short Run and Long Run

Features of a Perfectly Competitive Market ,[object Object],[object Object],[object Object],[object Object]

The Short-run Output Decision ,[object Object],[object Object],[object Object],[object Object]

The Firm’s Total Cost Structure (Reviewed) The shape of the total cost curve comes from diminishing returns in the short run. Short-run Total Variable Cost + Total Fixed Cost = Short-run Total Cost

The Revenue Structure of the Competitive Business Firm ,[object Object],[object Object]

Computing the Total Revenue of a Price-taker ,[object Object]

The Totals Approach to Profit Maximization ,[object Object]

The Marginal Approach ,[object Object],Marginal PRINCIPLE Increase the level of an activity if its marginal benefit exceeds its marginal cost, but reduce the level if the marginal cost exceeds the marginal benefit. If possible, pick the level at which the marginal benefit equals the marginal cost.

Marginal Revenue ,[object Object],[object Object]

The Marginal Rule for Profit Maximization ,[object Object]

Profit Maximization Using the Marginal Approach

Economic Profit ,[object Object],[object Object]

Shut-down Decision ,[object Object],[object Object],[object Object],[object Object]

The Shut-down Decision ,[object Object],[object Object],[object Object]

The Shut-down Decision ,[object Object],[object Object]

Short-run Supply Curve ,[object Object]

Short-run Supply Curve ,[object Object],[object Object],[object Object]

The Market Supply Curve ,[object Object]

A Market in Long-run Equilibrium ,[object Object],[object Object],[object Object],A market reaches a long-run equilibrium when three conditions hold:

A Market in Long-run Equilibrium ,[object Object],[object Object]

A Market in Long-run Equilibrium ,[object Object]

The Long-run Supply Curve for an Increasing-cost Industry ,[object Object],[object Object],[object Object],[object Object]

Industry Output and Average Production Cost ,[object Object],14 96 7 1,050 150 12 84 7 700 100 $10 $70 7 350 50 Average Cost per Rake Typical Cost for Typical Firm Rakes per Firm Industry Output Number of Firms

Drawing the Long-run Market Supply Curve ,[object Object],[object Object]

An Increase in Demand and the Incentive to Enter ,[object Object]

The Long-run Effects of an Increase in Demand ,[object Object]

The Long-run Effects of an Increase in Demand ,[object Object],[object Object]

Long-run Supply Curve for an Constant-cost Industry ,[object Object],[object Object],[object Object]

Long-run Supply Curve for the Ice Industry ,[object Object],[object Object]

Perfect competition

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Perfect competition