Chapter 8 & 9 by Jason Folsom-145003500

Pure Competition

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Involves a large number of firms producing a standardized product.

Pure Monopoly

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When a single firm has total control over an entire industry

Oligarchy

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Few firms
standardized or differentiated products
mutually interdependent
difficult to enter industry

Characteristics of Pure Comp.

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Very large numbers, standardized product, price is at the mercy of the market and free entry and exit.

Average Revenue

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Price and AR are the same thing.

Monopolistic competition

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When differentiated products are sold by a relatively large amount of sellers (i.e. smartphone industry, Apple v Samsung)

Shutdown Case

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Firms will produce 0 if their AVC is higher than their MR or price. Their total costs or losses will be whatever their fixed costs are

Marginal Revenue

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The change in total revenue that results from selling one more unit of output.

Break even point

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An output at which a firm makes a normal profit but not an economic one

Total Revenue

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Price x Quantity

Constant cost industry

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When the industry expands or contracts the resource prices aren't affected. Graphically it means that entry or exit of firms does not shift the long run atc cost curve.

Long Run in Pure Competition

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The long run's price curve equals the minimum average total cost value after all long run firm adjustments.

Loss Minimizing Case

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Q will be where MR≥MC
MR > AVC
TR=(MR-ATC) * Q

Increasing cost Industry

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Entry of new firms increases resource prices. As the industry expands ATC costs curves shift upward. As the industry contracts atc costs shift downward

Allocative Efficiency

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P = MC
If P > MC more needs to be produced
If P < MC less needs to be produced

Creative Destruction

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New products and creative production methods that destroy the firms who are committed to selling an existing product.

Productive Efficiency

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P=MC=minimum ATC: If p is any higher it would be overusing resources, and vice versa if lower.

Consumer/Producer Surplus

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The difference between what consumers/producers are willing to pay/sell their product for and the equilibrium price.
Find the area of the top triangle for consumer and the bottom triangle.
Maximum surplus is when the price is at equilibrium.