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Unit 4 Perfect and Imperfect Competition Chapter 10 & 13 (Lesson 1:…
Unit 4
Perfect and Imperfect Competition
Chapter 10 & 13
Lesson 1: Perfect Competition
LO 1: Give the names and summarize the main characteristics of the four basic market models
Four Market Models
Pure Competition
Pure monopoly
Monopolistic competition
Oligopoly
LO 2: List the conditions required for purely competitive markets
Pure Competition: Characteristics and Occurrence
Very large numbers
Standardized product
Price takers
Free entry and exit
LO 3: Explain how demand is seen by a purely competitive seller
Demand as seen by a purely competitive seller
Price elasticity demand
Average, Total and Marginal Revenue
Lesson 2: Profit Maximisation
LO 4: Convey how purely competitive firms can use the total-revenue-total-cost approach to maximize profits or minimize losses in the short run
Profit maximisation in the short run: Total-Revenue-Total-Cost approach
Break-even point
LO 5: Explain how purely competitive firms can use the marginal-revenue-marginal-cost approach to maximise profits or minimise losses in the short run
Profit maximisation in the short run: Marginal-Revenue-Marginal-Cost approach
MR=MC rule
Profit-Maximizing Case
Loss-Maximizing Case
Shut-down Case
LO 6: Explain why a competitive firm's marginal cost curve is the same as its supply curve
Marginal cost and Short Run Supply
Generalized depiction
Short-run supply curve
Diminishing Returns, Production Costs, and Product Supply
Changes in Supply
Firm and Industry: Equilibrium Price
Lesson 3: Imperfect Competition
LO 7: List the characteristics of monopolistic competition
Monopolistic Competition
Relatively large numbers
Differentiated products
Easy Entry and Exit
Advertising
Nonprice competition
Monopolistically Competitive Industries
Four-firm concentration ratio
Herfindahl index
LO 8: Explain why monopolistic competitors earn only a normal profit in the long run
Price and Output in Monopolistic Competition
The Firm's Demand Curve
The Short Run: Profit or Loss
The Long Run: Only a Normal Profit
LO 9: Explain why monopolistic competition delivers neither productive nor allocative efficiency
Monopolistic Competition and Efficiency
Neither productive nor Allocative Efficiency
Excess Capacity