nuhfil hanani : web site : BAB 10 Persaingan sempurna Perfect competition

nuhfil hanani : web site : Pasar Persaingan Sempurna u many buyers and sellers, u identical (also known as homogeneous) products, u no barriers to either entry or exit, and u buyers and sellers have perfect information.

nuhfil hanani : web site : Profit maximization assumption Firms act to maximize profit (  ). Profit = total revenue – total cost = PQ – FC – VC

nuhfil hanani : web site : Profit maximization example QTRTC  MRMC  003(3) (1) (2) (3)

nuhfil hanani : web site : Rule for profit maximization If MC is rising, produce up to the point at which MC = MR.

nuhfil hanani : web site : Figure 1 Profit Maximization for a Competitive Firm Copyright © 2004 South-Western Quantity 0 Costs and Revenue MC ATC AVC MC 1 Q 1 2 Q 2 The firm maximizes profit by producing the quantity at which marginal cost equals marginal revenue. Q MAX P = MR 1 = 2 P = AR = MR

nuhfil hanani : web site : Figure 2 Marginal Cost as the Competitive Firm’s Supply Curve Copyright © 2004 South-Western Quantity 0 Price MC ATC AVC P 1 Q 1 P 2 Q 2 This section of the firm’s MC curve is also the firm’s supply curve.

nuhfil hanani : web site : Figure 3 The Competitive Firm’s Short Run Supply Curve Copyright © 2004 South-Western MC Quantity ATC AVC 0 Costs Firm shuts down if P < AVC Firm’s short-run supply curve If P > AVC, firm will continue to produce in the short run. If P > ATC, the firm will continue to produce at a profit.

nuhfil hanani : web site : Shutdown vs. Exit A shutdown refers to a short-run decision not to produce anything during a specific period of time. Exit refers to a long-run decision to leave the market.

nuhfil hanani : web site : Figure 4 The Competitive Firm’s Long-Run Supply Curve Copyright © 2004 South-Western MC = long-run S Firm exits if P < ATC Quantity ATC 0 Costs Firm’s long-run supply curve Firm enters if P > ATC

nuhfil hanani : web site : Figure 5 Profit as the Area between Price and Average Total Cost Copyright © 2004 South-Western (a) A Firm with Profits Quantity 0 Price P=AR= MR ATCMC P ATC Q (profit-maximizing quantity) Profit

nuhfil hanani : web site : Figure 5 Profit as the Area between Price and Average Total Cost Copyright © 2004 South-Western (b) A Firm with Losses Quantity 0 Price ATCMC (loss-minimizing quantity) P=AR= MR P ATC Q Loss

nuhfil hanani : web site : Figure 6 Market Supply with a Fixed Number of Firms Copyright © 2004 South-Western (a) Individual Firm Supply Quantity (firm) 0 Price MC $ (b) Market Supply Quantity (market) 0 Price Supply ,000 $ ,000

nuhfil hanani : web site : Figure 7 Market Supply with Entry and Exit Copyright © 2004 South-Western (a) Firm’s Zero-Profit Condition Quantity (firm) 0 Price (b) Market Supply Quantity (market) Price 0 P = minimum ATC Supply MC ATC

nuhfil hanani : web site : Figure 8 An Increase in Demand in the Short Run and Long Run Firm (a) Initial Condition Quantity (firm) 0 Price Market Quantity (market) Price 0 DDemand, 1 SShort-run supply, 1 P 1 ATC Long-run supply P 1 1 Q A MC

nuhfil hanani : web site : Figure 8 An Increase in Demand in the Short Run and Long Run Copyright © 2004 South-Western Market Firm (b) Short-Run Response Quantity (firm) 0 Price MC ATC Profit P 1 Quantity (market) Long-run supply Price 0 D 1 D 2 P 1 S 1 P 2 Q 1 A Q 2 P 2 B

nuhfil hanani : web site : Figure 8 An Increase in Demand in the Short Run and Long Run Copyright © 2004 South-Western P 1 Firm (c) Long-Run Response Quantity (firm) 0 Price MC ATC Market Quantity (market) Price 0 P 1 P 2 Q 1 Q 2 Long-run supply B D 1 D 2 S 1 A S 2 Q 3 C