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1
chp 12 Managerial Decisions in Cochp 12 Managerial Decisions in Competitive Marketsmpetitive Markets
chp 12 Managerial Decisions in Cochp 12 Managerial Decisions in Competitive Marketsmpetitive Markets
Market can be divided into 4 basic groups:
Perfect competition Monopoly
Monopolistic competition Oligopoly
In this chapter the first 3 will be discussed.
Market can be divided into 4 basic groups:
Perfect competition Monopoly
Monopolistic competition Oligopoly
In this chapter the first 3 will be discussed.
2
Characteristics of market Characteristics of market structurestructure
Market structure
Number of producers
Power over price
Types of products Examples
Perfect competition
oligopoly
monopolistic competition
monopoly
Many
Many
Few
One
Standardized
differentiated
Standardized or differentiated
Unique
None
Some
Some
considerable
Agriculture
Retail trade
Oil, steel
Public utility
3
What is the difference between
Perfect competition Monopoly
Monopolistic competition
Market conditions are given and no need to consider your competitors.
Oligopoly React to your competitors’ actions.
4
(( 11 )) The product is identicalThe product is identical
(( 22 )) Each firm cannot affect the market Each firm cannot affect the market
price price
(( 33 )) There exists unrestricted entry There exists unrestricted entry
(( 44 )) Full and complete knowledgeFull and complete knowledge
12.1Characteristics of Perfect 12.1Characteristics of Perfect CompetitionCompetition
5
Q Q
PP
E
DS
d
O O
PePe
MarketDemand curve Facing A Perfect Demand curve Facing A Perfect
CompetitorCompetitor
12.2Demand Facing A Perfectly 12.2Demand Facing A Perfectly Competitive FirmCompetitive Firm
8
Q
P
d ( AR = MR = P )
O
Pe
SMC
SAC
QeQ1 Q2
E
边际收益等于边际成本原则分析一边际收益等于边际成本原则分析一边际收益等于边际成本原则分析一边际收益等于边际成本原则分析一§12.3Profit Maximization In The §12.3Profit Maximization In The Short RunShort Run
§12.3Profit Maximization In The §12.3Profit Maximization In The Short RunShort Run
9
Positive Economic ProfitPositive Economic ProfitPositive Economic ProfitPositive Economic Profit
Q
P
d1 ( AR1 = MR1 = P1 )
O
P1
SMCSAC
Q1Q2
E1
AVCAVC
E2
P2 F1d2 ( AR2 = MR2 =
P2 )
Break-even Break-even pointspoints
Break-even Break-even pointspoints
10
PP
OO
SMCSMCSACSAC
QQ33
AVCAVCdd33 (( ARAR33 = MR = MR33 = =
PP33 ))dd44 (( ARAR44 = MR = MR44 = =
PP44 ))
EE33
EE44
PP33
PP44
QQ44
FF33 EE22
Shut down Shut down the firmthe firm
Shut down Shut down the firmthe firm
FF44
The Firm Operates at a LossThe Firm Operates at a LossThe Firm Operates at a LossThe Firm Operates at a Loss
11QQ
PP
OO
SMCSMCSACSAC
AVCAVC
dd55 (( ARAR55 = MR = MR55 = =
PP55 ))
EE55PP55
QQ55
FF55
EE44
EE22
GG55
12QQ
PP
d1 ( AR1 = MR1 = P1 )
O
P1
SMCSMCSAC
Q3 Q1Q2
E1
AVC
d2 ( AR2 = MR2 = P2 )
d3 ( AR3 = MR3 = P3 )d4 ( AR4 = MR4 = P4 )d5 ( AR5 = MR5 =
P5 )
E2
E3
E4
E5
P2
P3
P4
P5
Q4Q5
Short term Equilibrium under Perfect competition
14
12.4SHORT-RUN SUPPLY FOR THE 12.4SHORT-RUN SUPPLY FOR THE FIRM AND INDUSTRYFIRM AND INDUSTRY
PP
OO
PP11
SMCSMC
QQ33 QQ11QQ22
PP22
PP33
PP44
QQ44
AVC
QQSS = = ff (( PP ))
EE22
EE33
EE44
EE11
15
PP
OO
PP22
SMCSMC
QQi2i2
PP11
QQi1i1
AVCAVC
SS
QQQQ
PP
OO
PP22
QQ22
PP11
QQ11
SS
Individual firmIndividual firm INDUSTRYINDUSTRYINDUSTRYINDUSTRY
11
1 )(PP
PQQn
ii
1
11 )(
PPPQQ
n
ii
16Q
P
d1 ( AR1 = MR1 = P1 )
O
LMC
LAC
Q3Q1 Q2
d2 ( AR2 = MR2 = P2 )
d3 ( AR3 = MR3 = P3 )
E3
E2
E1
P3
P2
P1
12.3Profit Maximization In The 12.3Profit Maximization In The Long RunLong Run
12.3Profit Maximization In The 12.3Profit Maximization In The Long RunLong Run
F1F3
20
• 由于在长期均衡时,完全竞争的市场上利润必等于零,企业进入某行业最后都会处于零利润状态,因此企业就无必要进入。 (北大 2000 )
• 如果一个厂商是追求利润最大化的,那么它就不应该在亏损的状态下维持它得到的利润。 (北大 1997 )
23
• 1. Which of the following is a condition of perfect competition?
• A. products produced by rival firms are perfect substitutes B. individual firms can affect market supply C. industry sales are small D. restricted entry and exit E. firms do not have complete knowledge about production and prices
24
• 2. For a firm in a perfectly competitive market, marginal revenue?
• A. is the addition to total revenue from producing one more unit of output. B. is equal to price at any level of output. C. decreases as the firm produces more output. D. both a and b E. both a and c
26
• If the firm is producing 100 units of output, increasing output by one unit would ______ the firm's profit by $______.
• A. decrease, $2 B. increase, $2 C. increase, $1 D. decrease, $1 E. increase, $3
27
• 4. If the firm is producing 200 units of output, decreasing output by one unit would ______ the firm's profit by $______.
• A. increase, $2 B. decrease, $2 C. increase, $3 D. decrease, $5 E. increase, $5
28
• 5. In order to minimize losses in the short run, a perfectly competitive firm should shut down if?
• A. total revenue is less than total cost. B. total revenue is less than total fixed cost. C. total revenue is less than the difference between total fixed cost and total variable cost. D. total revenue is less than total variable cost.
29
• 6. When a perfect competitive industry is in long-run equilibrium,
• A. firms have incentives to enter or exit the industry. B. market price is equal to minimum long-run average cost. C. each firm earns a normal return. D. both b and c E. all of the above
31
• If market price is $50, how much output will the firm produce?
• A. 0 units B. 100 units C. 300 units D. 400 units
32
• 8. If market price is $50, how much profit will the firm earn?
• A. $12,000 B. $15,000 C. $3,000 D. $6,000
33
• 9. If market price is $20, how much profit will the firm earn?
• A. zero B. -$3,000 C. $3,000 D. $300
35
Q
P
O
P1
SMCLAC
Qi1
E
SAC
Qi2
D1
D2SS1 SS2
O
P1
P2
Q2Q1 Q3
A B
LS
Q
P
Typical firm industry
Constant-cost IndustryConstant-cost IndustryConstant-cost IndustryConstant-cost Industry
P2
LONG-RUN SUPPLY FOR THE INDUSTRYLONG-RUN SUPPLY FOR THE INDUSTRY
36
Q
P
O
P1
SMC1
Qi1
E1
SAC1
Qi2
D1 D2
SS1SS2
O
P1
P2
Q2Q1
A
B
LS
Q
P
Typical firm industry
SMC2
E2
SAC2
P2
Increasing-cost industryIncreasing-cost industryIncreasing-cost industryIncreasing-cost industry