CH06Economies of Scale,Imperfect Competition, and International Trade(发展经济学-厦门大学,陈涛)课件.pptVIP

Chapter 6;Introduction Economies of Scale and International Trade: An Overview Economies of Scale and Market Structure The Theory of Imperfect Competition Monopolistic Competition and Trade Dumping The Theory of External Economies External Economies and International Trade Summary ;Introduction;Economies of Scale and International Trade: An Overview;Under increasing returns to scale: Output grows proportionately more than the increase in all inputs. Average costs (costs per unit) decline with the size of the market. ;Economies of Scale and International Trade: An Overview;Economies of Scale and Market Structure;Imperfect competition Firms are aware that they can influence the price of their product. They know that they can sell more only by reducing their price. Each firm views itself as a price setter, choosing the price of its product, rather than a price taker. The simplest imperfectly competitive market structure is that of a pure monopoly, a market in which a firm faces no competition.;Monopoly: A Brief Review Marginal revenue The extra revenue the firm gains from selling an additional unit Its curve, MR, always lies below the demand curve, D. In order to sell an additional unit of output the firm must lower the price of all units sold (not just the marginal one). ;The Theory of Imperfect Competition;Marginal Revenue and Price Marginal revenue is always less than the price. The relationship between marginal revenue and price depends on two things: How much output the firm is already selling The slope of the demand curve It tells us how much the monopolist has to cut his price to sell one more unit of output.;Assume that the demand curve the firm faces is a straight line: Q = A – B x P (6-1) Then the MR that the firm faces is given by: MR = P – Q/B (6-2) Average and Marginal Costs Average Cost (AC) is total cost divided by output. Marginal Cost (MC) is the amount it costs the firm to produce one extra unit.