Market- Structure-and- Equilibrium课件.pptVIP

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Market Structure and Equilibrium We will consider the two extreme cases Perfect Competition Monopoly * 。 Market Efficiency Decision makers in a market behave rationally and have full access to all relevant behavior. Consumer and producer surplus is maximized * 。 Determinants of Market Structure Number and size of buyers, sellers, and potential entrants, Degree of product differentiation Amount and cost information about product price and quality, and Conditions for entry into and exit from a market * 。 Market Equilibrium Perfect Competition Supply forces (producers) and demand forces (consumers) seek a balance Price below perceived value increases demand Price above ATC provides pure profit, an incentive to increase supply Supply curve Demand curve Q P Pe * 。 Individual Firm’s Demand and MR Curve Q P Pe Highly elastic demand One firm’s change in Q has little effect on price ?Q ?P * 。 Market Equilibrium Perfect Competition Price above ATC provides pure profit, an incentive to increase output Pure profit equals (P1 x Q1) – (P2 x Q2) P1 MC ATC Price (P) P2 Q2 Q1 Individual Firm * 。 Market Equilibrium Perfect Competition All firms are price takers Market price (P1) equals marginal revenue (MR) and average revenue (AR) Optimal level of output is where MR = MC = P1 In long-run P will go to P2 where pure profit is eliminated P1 MC ATC Price (P) P2 Q2 Q1 Individual Firm * 。 Market Supply Curve Summation of supply curves for individual firms Joe’s sawmill Pete’s sawmill Tracy’s sawmill Janet’s sawmill Market supply curve Q P Sum vertically + + + = Qm Qj Qt Qp Qj Demand Pm (same P for all firms and market) * 。 Perfect Competition - Example Given supply and demand functions, Qs = 30 + 55 P Qd = 230 – 45 P Determine marginal revenue, MR, i.e. Pe, from supply and demand curves for total market. Calculate Pe from market supply equals demand equilibrium condition, Qs = Qd 30 + 55 P = 230 –