ECO2023: Perfect Competition, Monopoly & Market Failure

Perfect Competition T
Perfectly Competitive Market assumptions
Many buyers sellers
Allfirms sell homogenous same products
Iff Revenue
Costs
No barriers to entry in the market


Ell's pricetakers no single buyer seller can affect market price
No arbitrage buying in one market selling in another

sunk costs costs that cannot be changed ignore them
fixed costs costs that don't vary with quantity produced
variable costs costs that vary with quantity produced

hort Run period before entry exit occurs ignore FC
ong Run period after all entry exit occurs

plicit Costs Implicit Costs Marginal MR 1T
sts that involve spending costs that don't involve Revenue
oney out of pocket s'time
Equipment E.fi meiteyyncos marginal
mc.IT
food g next best thing
cost
MR MC pity
is MRC MC
t
a stfoduc EE.hn meaty
tgpE EEiiittiEim icit costs maximize




7
TIE gosgetProfanity FC V
markets
P MC
pame iii
n'rechand
cheese g
make
MR p singleFirm
MC Progger


at a III a

, 9 9
J
erfect Competition MC
verage cost cost per unit AC
Firm M
te that or p ac c

rofit area of rectangle

calculating Profit w AC


IEEE Eleven
T.it Yes
exit have occured
44815 558,9ft Entity
entre or exit
I 89 Ex
Short Run
otions
shutdown produce nothing choose whichever
continue to operate at a loss option maximizes profit
verage Variable cost AVC
nores fixed costs FC

AVC shutdown ALEFT Iff at aegg
AVC operate at a loss

Industry all firms that sell a
particular good or service
characteristics
aggin 1 Number of firms
2 similarity of good service
3 Ease new firms can enter industry
Industrial organization study of firm
Agglomeration effect structure industries and competition
benefits of industries clustering
together