微观经济学Profit Maximization and Competitive Supply.pptVIP

Chapter 8 Chapter 8 Profit Maximization and Competitive Supply Topics to be Discussed Perfectly Competitive Markets Profit Maximization Marginal Revenue, Marginal Cost, and Profit Maximization Choosing Output in the Short Run Topics to be Discussed The Competitive Firm’s Short-Run Supply Curve Short-Run Market Supply Choosing Output in the Long Run The Industry’s Long-Run Supply Curve Perfectly Competitive Markets The model of perfect competition can be used to study a variety of markets Basic assumptions of Perfectly Competitive Markets Price taking Product homogeneity Free entry and exit Perfectly Competitive Markets Price Taking The individual firm sells a very small share of the total market output and, therefore, cannot influence market price Each firm takes market price as given – price taker The individual consumer buys too small a share of industry output to have any impact on market price Perfectly Competitive Markets Product Homogeneity The products of all firms are perfect substitutes Product quality is relatively similar as well as other product characteristics Agricultural products, oil, copper, iron, lumber Heterogeneous products, such as brand names, can charge higher prices because they are perceived as better Perfectly Competitive Markets Free Entry and Exit When there are no special costs that make it difficult for a firm to enter (or exit) an industry Buyers can easily switch from one supplier to another Suppliers can easily enter or exit a market Pharmaceutical companies are not perfectly competitive because of the large costs of RD required When are Markets Competitive? Few real products are perfectly competitive Many markets are, however, highly competitive They face relatively low entry and exit costs Highly elastic demand curves No rule of thumb to determine whether a market is close to perfectly competitive Depends on how they behave in situations Profit Maximization Do firms maximize profits? Managers in firms may be concerned with other