Industrial Organization  What is it?  Why study it? This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill.

Competition  Assumptions Homogeneous Goods Perfect Information Price Taking No Transactions Costs No Externalities Free Entry and Exit Perfect divisibility of output Profit Maximization

Price Elasticity  Price Elasticity of Demand (ε) Firm Market Short vs. Long Run  Price Elasticity of Supply (η) Firm Market Short vs. Long Run This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill.

Residual Demand D SoSo Industry Output, Q $ / Q Residual Demand 10,0509,95010, $6 $5 $ / q Firm i‘s output, q

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Are Farmers Price Takers? Crop Lowest Estimated market Demand Elasticity Number of Firms Each Farm’s residual demand elasticity Apples-.2141, Grapes-.1624,982-3,997 Sweet Corn ,260-31,353 Sources: Number of Farms: US Department of Commerce, Bureau of the Census, Survey of Elasticities: Nuckton.

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Efficiency  Production  Consumption Consumer Surplus Producer Surplus Deadweight Loss

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Maximizing Total Surplus D S Industry Output, Q $ / Q 10,000 $6

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Restrictions on Entry in the Long Run D S 100 firms Industry Output, Q $ / Q $ / q A firm’s output, q ATC MC S 150 firms

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Barriers to entry and Exit  Entry Barriers  Exit Barriers

This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill. Externalities D Pollution MC + Private MC Industry Output, Q $ / Q Private MC

Blank Space This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill.

Blank Space This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill.

Blank Space This slideshow was written by Ken Chapman, but is substantially based on concepts from Modern Industrial Organization by Carlton and Perloff, 4 th edition, McGraw-Hill.