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Unit 4: Perfect and Imperfect competition - Coggle Diagram
Unit 4: Perfect and Imperfect competition
Perfect competition
Conditions purely competitive market
Small share
Price taker
Demand purely competitive seller
purely elastic
Imperfect competition
monopolistic competition
profit in a long run
firms earn normal Profit (Break even)
Characteristics
small amount of monopoly power
large amount of competition
Productive efficiency
firms price=minimum ATC of producing
Allocation efficiency
production Price=marginal cost of production
Basic market models
Oligopoly
limited control over a price
entry blocked
standardised or differentiated product
non-price competition
few firms
Monopolistic competition
differentiated products
some/limited control over price
Many firms
relatively easy to enter or exit
considerable non-price competition
Pure Competition
easy to enter or exit
no control over a price
no non-price competition
standardised products
large number of firms
Monopoly
Unique product
considerable control over price
entry blocked
One firm
non-price competition
Profit maximisation
MR-MC approach
Questions
if it can produce in a short run. What amount should be produced?
what economic profit or loss will be realised?
should a firm produce in a short run?
Marginal cost curve
profit maximised when: MR=P
profit maximised when: MR=MC
TR-TC approach
Questions
if it can produce in a short run. What should be produced?
what economic loss or profit will be realised?
should the firm need to produce in a short run?