Pure Competition

FOUR MARKET MODELS Pure Competition Market Structure Continuum

FOUR MARKET MODELS Pure Monopoly Market Structure Continuum Pure Competition Market Structure Continuum

FOUR MARKET MODELS Imperfect Competition Market Structure Continuum Pure Competition Pure Monopoly Market Structure Continuum

FOUR MARKET MODELS Monopolistic Competition Market Structure Continuum Pure Competition Pure Monopoly Market Structure Continuum

FOUR MARKET MODELS Oligopoly Market Structure Continuum Pure Competition Monopolistic Competition Pure Monopoly Market Structure Continuum

Very Large Numbers Standardized Product Free Entry and Exit FOUR MARKET MODELS Pure Competition: Very Large Numbers Standardized Product Free Entry and Exit Pure Competition Monopolistic Competition Pure Monopoly Oligopoly Market Structure Continuum

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 $ 0

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 $ 0 131 ] $131

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 2 $ 0 131 262 ] $131 131 ]

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 2 3 $ 0 131 262 393 ] $131 131 ] ]

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 2 3 4 $ 0 131 262 393 524 ] $131 131 ] ] ]

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 2 3 4 5 6 7 8 9 10 $ 0 131 262 393 524 655 786 917 1048 1179 1310 ] $131 131 ] ] ] ]

DEMAND AS SEEN BY A PURELY COMPETITIVE SELLER Product Price (P) (Average Revenue) Graphically Presented… Quantity Demanded (Q) Total Revenue (TR) Marginal Revenue (MR) $131 131 1 2 3 4 5 6 7 8 9 10 $ 0 131 262 393 524 655 786 917 1048 1179 1310 ] $131 131 ] ] ] ]

TR P = MR DEMAND, MARGINAL REVENUE, AND TOTAL REVENUE IN PURE COMPETITION 1179 1048 917 786 655 524 393 262 131 TR Price and revenue P = MR 1 2 3 4 5 6 7 8 9 10 Quantity Demanded (sold)

MR = MC Rule SHORT RUN PROFIT MAXIMIZATION Marginal-Revenue -Marginal Cost Approach MR = MC Rule

Profit Maximization Position MARGINAL REVENUE-MARGINAL COST APPROACH Profit Maximization Position $200 150 100 50 Economic Profit MC $131.00 MR ATC Cost and Revenue AVC $97.78 1 2 3 4 5 6 7 8 9 10

MR = MC Optimum Solution MARGINAL REVENUE-MARGINAL COST APPROACH Profit Maximization Position $200 150 100 50 Economic Profit MC MR = MC Optimum Solution $131.00 MR ATC Cost and Revenue AVC $97.78 1 2 3 4 5 6 7 8 9 10

Short-Run Shut Down Point MARGINAL REVENUE-MARGINAL COST APPROACH Short-Run Shut Down Point $200 150 100 50 MC ATC Cost and Revenue AVC MR $71.00 Minimum AVC is the Shut-Down Point 1 2 3 4 5 6 7 8 9 10