1. Microeconomics
Lecture 14
!
Market Structures
Perfect Competition

2. Key Terms
average revenue
marginal revenue
sunk cost

3. Breakeven

4. Breakeven
Where total revenue
equals total costs

5. Breakeven

6. Breakeven
FC = 1000

7. Breakeven
FC = 1000
VC = 30Q

8. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC

9. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q

10. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50

11. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q

12. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q

13. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC

14. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q

15. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q
20Q = 1000

16. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q
20Q = 1000
Q = 50

17. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q
20Q = 1000
Q = 50
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
0
10 20 30 40 50 60 70 80 90 100

18. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q
20Q = 1000
Q = 50
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
0
10 20 30 40 50 60 70 80 90 100

19. Breakeven
FC = 1000
VC = 30Q
TC = FC + VC
TC = 1000 + 30Q
P = 50
TR = P x Q
TR = 50Q
TR = TC
50Q = 1000 + 30Q
20Q = 1000
Q = 50
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
0
10 20 30 40 50 60 70 80 90 100

20. Breakeven

21. Breakeven
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

22. Breakeven
5000
4500
4000
3500
3000
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

23. Breakeven
5000
4500
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

24. Breakeven
5000
4500
Total Revenue
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

25. Breakeven
5000
4500
Total Revenue
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

26. Breakeven
5000
4500
Total Revenue
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

27. Breakeven
5000
4500
Total Revenue
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

28. Breakeven
5000
4500
Total Revenue
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

29. Breakeven
5000
4500
Total Revenue
Profit
4000
3500
3000
Total Cost
2500
2000
1500
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

30. Breakeven
5000
4500
Total Revenue
Profit
4000
3500
3000
Total Cost
2500
2000
1500
Loss
1000
500
0
0
10
20
30
40
50
60
70
80
90
100

31. The Four Market Structures

32. The Four Market Structures

33. The Four Market Structures

34. The Four Market Structures
Perfect
Competition

35. The Four Market Structures
Perfect
Competition
Monopoly

36. The Four Market Structures
Perfect
Competition
Monopoly
Monopolistic
Competition
Brand

37. The Four Market Structures
Perfect
Competition
Monopoly
Monopolistic
Competition
Brand
Oligopoly

38. The Four Market Structures
Perfect
Competition
Number of
Firms
Monopoly
Monopolistic
Competition
Brand
Oligopoly

39. The Four Market Structures
Perfect
Competition
Number of
Firms
Many
Monopoly
Monopolistic
Competition
Brand
Oligopoly

40. The Four Market Structures
Perfect
Competition
Number of
Firms
Monopoly
Many
One
Monopolistic
Competition
Brand
Oligopoly

41. The Four Market Structures
Perfect
Competition
Number of
Firms
Monopoly
Monopolistic
Competition
Brand
Many
One
Many
Oligopoly

42. The Four Market Structures
Perfect
Competition
Number of
Firms
Many
Monopoly
Monopolistic
Competition
Brand
Oligopoly
One
Many
Few

43. The Four Market Structures
Perfect
Competition
Number of
Firms
Type of
Product
Many
Monopoly
Monopolistic
Competition
Brand
Oligopoly
One
Many
Few

44. The Four Market Structures
Perfect
Competition
Number of
Firms
Many
Type of
Product
Identical
Monopoly
Monopolistic
Competition
Brand
Oligopoly
One
Many
Few

45. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Identical
Unique
Perfect
Competition
Number of
Firms
Type of
Product

46. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Identical
Unique
Differentiated
Perfect
Competition
Number of
Firms
Type of
Product

47. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Identical
Unique
Differentiated
Either
Perfect
Competition
Number of
Firms
Type of
Product

48. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Identical
Unique
Differentiated
Either
Perfect
Competition
Number of
Firms
Type of
Product
Ease of
Entry

49. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Perfect
Competition
Number of
Firms

50. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Perfect
Competition
Number of
Firms

51. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Perfect
Competition
Number of
Firms

52. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Perfect
Competition
Number of
Firms

53. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Perfect
Competition
Number of
Firms
Examples

54. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Examples
Commodities
Rice
Perfect
Competition
Number of
Firms

55. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Examples
Commodities
Rice
Government
Utilities
Perfect
Competition
Number of
Firms

56. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Government
Utilities
Brands
Clothing
Restaurants
Perfect
Competition
Number of
Firms
Examples
Commodities
Rice

57. The Four Market Structures
Monopoly
Monopolistic
Competition
Brand
Oligopoly
Many
One
Many
Few
Type of
Product
Identical
Unique
Differentiated
Either
Ease of
Entry
Easy
Blocked
Easy
Hard
Government
Utilities
Brands
Clothing
Restaurants
Manufacturing
Cars
Computers
Perfect
Competition
Number of
Firms
Examples
Commodities
Rice

58. Market Power

59. Market Power
Few versus Many

60. Perfect Competition

61. Perfect Competition
Many buyers and
sellers
Similar Product
Easy Entry

62. Perfect Competition

63. Perfect Competition
Price is the same
because no one has
market power

64. Perfect Competition

65. Perfect Competition
No one has the
power to raise the
price or lower the
price

66. Perfect Competition

67. Perfect Competition
Price equals average
revenue equals
marginal revenue
All the same

68. Perfect Competition
Market

69. Perfect Competition
Market
Individual

70. Perfect Competition
Market
Individual
Price is flat
Does not change with output
Price = Marginal Revenue

72. Q
0
1
2
3
4
5
6
7
8
9
10

73. Fixed
Cost
Q FC
0 100
1 100
2 100
3 100
4 100
5 100
6 100
7 100
8 100
9 100
10 100

74. Fixed
Variable
Cost
Cost
Q FC
VC
0 100
1 100
20
2 100
39
3 100
59
4 100
84
5 100
120
6 100
160
7 100
212
8 100
270
9 100
340
10 100
420

75. Total
Cost
Fixed
Variable
TC
Cost
Cost
FC +
Q FC
VC
VC
0 100
100
1 100
20
120
2 100
39
139
3 100
59
159
4 100
84
184
5 100
120
220
6 100
160
260
7 100
212
312
8 100
270
370
9 100
340
440
10 100
420
520

76. Total
Average
Cost
Total
Fixed
Variable
TC
Cost
Cost
Cost
FC +
ATC
Q FC
VC
VC TC ÷ Q
0 100
100
1 100
20
120
120.0
2 100
39
139
69.5
3 100
59
159
53.0
4 100
84
184
46.0
5 100
120
220
44.0
6 100
160
260
43.3
7 100
212
312
44.6
8 100
270
370
46.3
9 100
340
440
48.9
10 100
420
520
52.0

77. Total
Average
Marginal
Cost
Total
Cost
Fixed
Variable
TC
Cost
MC
Cost
Cost
FC +
ATC
∆TC ÷
Q FC
VC
VC TC ÷ Q ∆Q
0 100
100
1 100
20
120
120.0
20
2 100
39
139
69.5
19
3 100
59
159
53.0
20
4 100
84
184
46.0
25
5 100
120
220
44.0
36
6 100
160
260
43.3
40
7 100
212
312
44.6
52
8 100
270
370
46.3
58
9 100
340
440
48.9
70
10 100
420
520
52.0
80

78. Total
Average
Marginal
Cost
Total
Cost
Fixed
Variable
TC
Cost
MC
Cost
Cost
FC +
ATC
∆TC ÷ Price
Q FC
VC
VC TC ÷ Q ∆Q
P
0 100
100
1 100
20
120
120.0
20
50
2 100
39
139
69.5
19
50
3 100
59
159
53.0
20
50
4 100
84
184
46.0
25
50
5 100
120
220
44.0
36
50
6 100
160
260
43.3
40
50
7 100
212
312
44.6
52
50
8 100
270
370
46.3
58
50
9 100
340
440
48.9
70
50
10 100
420
520
52.0
80
50

79. Total
Average
Marginal
Cost
Total
Cost
Total
Fixed
Variable
TC
Cost
MC
Revenue
Cost
Cost
FC +
ATC
∆TC ÷ Price
TR
Q FC
VC
VC TC ÷ Q ∆Q
P
PxQ
0 100
100
1 100
20
120
120.0
20
50
50
2 100
39
139
69.5
19
50
100
3 100
59
159
53.0
20
50
150
4 100
84
184
46.0
25
50
200
5 100
120
220
44.0
36
50
250
6 100
160
260
43.3
40
50
300
7 100
212
312
44.6
52
50
350
8 100
270
370
46.3
58
50
400
9 100
340
440
48.9
70
50
450
10 100
420
520
52.0
80
50
500

80. Total
Average
Marginal
Cost
Total
Cost
Total
Fixed
Variable
TC
Cost
MC
Revenue
Profit
Cost
Cost
FC +
ATC
∆TC ÷ Price
TR
PR
Q FC
VC
VC TC ÷ Q ∆Q
P
P x Q TR - TC
0 100
100
1 100
20
120
120.0
20
50
50
-70
2 100
39
139
69.5
19
50
100
-39
3 100
59
159
53.0
20
50
150
-9
4 100
84
184
46.0
25
50
200
16
5 100
120
220
44.0
36
50
250
30
6 100
160
260
43.3
40
50
300
40
7 100
212
312
44.6
52
50
350
38
8 100
270
370
46.3
58
50
400
30
9 100
340
440
48.9
70
50
450
10
10 100
420
520
52.0
80
50
500
-20

81. 100
90
80
70
60
50
40
30
20
10
0
1
2
3
4
5
6
7
8
9
10

82. MC≤MR
100
Are you
making
profit on
the next
unit?
90
80
Price = Average Revenue = Marginal Revenue
70
60
50
40
30
20
10
0
0
1
2
3
4
5
6
7
8
9
10

83. Two Questions

84. Two Questions
1. How much quantity to produce?
!
!
2. How much profit?

85. Two Questions
1. How much quantity to produce?
!
!
MC= MR
!
2. How much profit?
!
Profit = TR - TC
= (Price x Q) - (ATC x Q)

86. Perfect Competition

87. Perfect Competition
$
Quantity

88. Perfect Competition
$
P
Demand=MR
Quantity

89. Perfect Competition
$
P
Demand=MR
1. MR=MC?
Quantity

90. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

91. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

92. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity
Q

93. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Quantity
Q

94. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Total Revenue
Quantity
Q

95. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

96. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

97. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

98. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

99. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Cost
Quantity
Q

100. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
Total Cost
Quantity
Q
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
4. Profit =TR-TC
or (P-ATC) x Q

101. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
Profit
Total Cost
Quantity
Q
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
4. Profit =TR-TC
or (P-ATC) x Q

102. Perfect Competition
$
P
Demand=MR
Quantity

103. Perfect Competition
$
P
Demand=MR
1. MR=MC?
Quantity

104. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

105. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

106. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity
Q

107. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Quantity
Q

108. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Total Revenue
Quantity
Q

109. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

110. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

111. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

112. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

113. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Cost
Quantity
Q

114. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
Total Cost
Quantity
Q
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
4. Profit =TR-TC
or (P-ATC) x Q

115. Perfect Competition
$
Marginal Cost
Average Cost
MC
ATC
P
Demand=MR
Profit
Total Cost
Quantity
Q
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
4. Profit =TR-TC
or (P-ATC) x Q

116. Perfect Competition

117. Perfect Competition
$
Quantity

118. Perfect Competition
$
P
Demand=MR
Quantity

119. Perfect Competition
$
P
Demand=MR
1. MR=MC?
Quantity

120. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

121. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity

122. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
Quantity
Q

123. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Quantity
Q

124. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
Total Revenue
Quantity
Q

125. Perfect Competition
$
Marginal Cost
MC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

126. Perfect Competition
$
Marginal Cost
MC
Average Cost
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

127. Perfect Competition
$
Marginal Cost
MC
Average Cost
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

128. Perfect Competition
$
Marginal Cost
MC
Average Cost
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Revenue
Quantity
Q

129. Perfect Competition
$
Marginal Cost
MC
Average Cost
ATC
P
Demand=MR
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
Total Cost
Quantity
Q

130. Perfect Competition
$
P
Marginal Cost
MC
Average Cost
ATC
Loss
Demand=MR
Total Cost
Quantity
Q
1. MR=MC?
2. TR= P x Q
3. TC=ATC x Q
4. Profit =TR-TC
or (P-ATC) x Q