Less competition Perfect Competition Monopolistic Competition

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Presentation transcript:

Less competition Perfect Competition Monopolistic Competition Oligopoly Monopoly

$ $ S d = p P* D Q* Q q Industry Firm

Profit maximizing condition: $ MC Profit maximizing condition: Economic π MR = MC ATC d = p = mr π = TR - TC P* ATC* TR = P *q TC = ATC * q q1 q* q2 q

FIGURE 7.3 Long-Run Adjustment in Perfect Competition: Entry and Exit

Long-run equilibrium with short-run profits $ $ MC S0 Economic π ATC S1 d0 = p0 = mr0 P0 P0 ATC0 d1 = p1 = mr1 P1 P1 = ATC1 Economic π = 0 D Q0 Q1 Q q1 q0 q

Long-run equilibrium with short-run losses Economic losses (π < 0) $ $ ATC MC S0 ATC0 d1 = p1 = mr1 P1 P1 = ATC1 d0 = p0 = mr0 P0 P0 Economic π = 0 D Q1 Q0 Q q0 q1 q