《管理经济学》第七章.ppt

1、Competitive MarketsChapter 7Chapter 7 OVERVIEWCompetitive EnvironmentFactors That Shape the Competitive EnvironmentCompetitive Market CharacteristicsProfit Maximization in Competitive MarketsMarginal Cost and Firm SupplyCompetitive Market Supply CurveCompetitive Market EquilibriumChapter 7KEY CONCEP

2、TSmarket structuremarketpotential entrantproduct differentiationcompetitive marketsbarrier to entrybarrier to mobilitybarrier to exit perfect competitionprice takersnormal profiteconomic profiteconomic lossesmarginal analysiscompetitive firm short-run supply curvecompetitive firm long-run supply cur

3、ve.Competitive EnvironmentWhat is Market Structure?Market structure is the competitive environment.Number of buyers and sellers.Potential entrants.Barriers to entry and exit,etc.Vital Role of Potential EntrantsCompetition comes from actual and potential competitors.Potential entrants often affect pr

4、ice/output decisions.Factors that Shape the Competitive EnvironmentProduct DifferentiationR&D,innovation,and advertising are important in many markets.Production MethodsEconomies of scale can preclude small-firm size.Entry and Exit ConditionsBarriers to entry and exit can shelter incumbents from pot

5、ential entrants.Buyer PowerPowerful buyers can limit seller power.Competitive Market CharacteristicsBasic FeaturesMany buyers and sellers.Product homogeneity.Free entry and exit.Perfect information.Examples of Competitive MarketsAgricultural commodities.Prominent markets for intermediate goods and s

6、ervices.Unskilled labor market.Profit Maximization in Competitive MarketsProfit Maximization ImperativeNormal profit is return necessary to attract and maintain capital investment.Efficient firms can earn normal profit.Inefficient firms suffer losses.Role of Marginal AnalysisSet M=MR MC=0 to maximiz

7、e profits.MR=MC when profits are maximized.Marginal Cost and Firm SupplyShort-run Firm SupplyCompetitive market price(P)is shown as a horizontal line because P=MR.Firms marginal-cost curve shows the amount of output the firm would be willing to supply at any market price.Marginal cost curve is the s

8、hort-run supply curve so long as P AVC.Long-run Firm SupplyMarginal cost curve is the long-run supply curve so long as P ATC.In long run,firm must cover all necessary costs of production and earn a normal profit.Competitive Market Supply CurveMarket Supply With a Fixed Number of CompetitorsSupply is

9、 the sum of competitor output.Market Supply With Entry and ExitEntry results in more firms,increased output,a rightward shift in the supply curve,and drives down prices and profits.Exit reduces the number of firms,decreases the quantity of output,shifts the supply curve leftward,and allows prices an

10、d profits to rise for remaining competitors.Competitive Market Supply CurveEntry and exit in competitive markets will continue until P=AR=MR=MC=ATC.The long-run competitive market supply curve is a horizontal line equal to the market price.Because firms can more easily enter or exit in the long-run,

11、long-run supply curves tend to be more elastic than short-run supply curves.Competitive Market EquilibriumBalance of Supply and DemandEquilibrium is a balance of supply and demand.Normal Profit EquilibriumWith a horizontal market demand curve,MR=P.P=MR=MC=ATC.There are no economic profits.All firms

12、earn a normal rate of return.Problems 1Florida is the biggest sugar-producing state,but Michigan and Minnesota are home to thousands of sugar beet growers.Sugar prices in the United States average about 20 per pound,or more than double the world-wide average of less than 10 per pound given import qu

13、otas that restrict imports to about 15%of the U.S.market.Still,the industry is perfectly competitive for U.S.growers who take the market price of 20 as fixed.Thus,P=MR=20 in the U.S.sugar market.Assume that a typical sugar grower has fixed costs of$30,000 per year.Total variable cost(TVC),total cost

14、(TC),and marginal cost(MC)relations are:TVC=$15,000+$0.02Q+$0.00000018Q2TC=$45,000+$0.02Q+$0.00000018Q2MC=TC/Q =$0.02+$0.00000036Qwhere Q is pounds of sugar,total costs include a normal profit.A.Using the firms marginal cost curve,calculate the profit-maximizing short-run supply from a typical growe

15、r.B.Calculate the average variable cost curve for a typical grower,and verify that average variable costs are less than price at this optimal activity level.Problems 2The retail market for unleaded gasoline is fiercely price competitive.Consider the situation faced by a typical gasoline retailer whe

16、n the local market price for unleaded gasoline is$1.80 per gallon and total cost(TC)and marginal cost(MC)relations are:TC=$40,000+$1.64Q+$0.0000001Q2 MC=MTC/MQ=$1.64+$0.0000002Q and Q is gallons of gasoline.Total costs include a normal profit.A.Using the firms marginal cost curve,calculate the profit-maximizing long-run supply from a typical retailerB.Calculate the average total cost curve for a typical gasoline retailer,and verify that average total costs are less than price at the optimal acti