Please enable JavaScript.
Coggle requires JavaScript to display documents.
Perfect and imperfect competition - Coggle Diagram
Perfect and imperfect competition
Pure competition
Characteristics of pure competition
Large number of buyers and sellers
Easy entry and exit
"Price takers" no real control over price
Standardized products
Pure competition demand
The demand graph is a horizontal line
Firm produces as much or as little of a product at market price
Purely elastic demand
Monopolistic competition and efficiency
Excess capacity- a situation where a firm is producing at a lower scale of output than it is designed for.
Price > Marginal cost, condition for allocative efficiency
Price > minimum average total cost Productive inefficiency
Imperfect competition
Characteristics of monopolistic competition
Easy entry and exit
Nonprice competition
Relatively large number of buyers and sellers
Production differentiation
Monopolistic competition
Profit maximization
The MR - MC approach for profit maximization
Price = marginal revenue
Loss minimizing - Still produce if MR > minimum AVC
Short run supply- As long as price exceeds minimum AVC, the firm will continue to produce using the MR = MC
Supply is an upsloping line
The TR - TC approach to maximize profit
Past the break-even point
To produce the output level where total revenue exceeds total cost by the greatest amount