1 Welcome to EC 209: Managerial Economics- Group A By: Dr. Jacqueline Khorassani Study Guide Week Nine (Note: You must go over these slides and complete every task outlined here before Thursday, November 1)

2 Don’t forget that Aplia Assignment –Is due Wednesday before 5 PM. –Don’t miss it.

3 Chapter 8 Baye Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

4 Perfect Competition Environment What are the characteristics of this market structure? What are the implications of these characteristics for a firm operating in this market? Why do we study this market structure?

5 Managing a firm in a perfectly competitive market How should we maximize profits or minimize losses? –Where does the price come from? –Where does the quantity come from? –Should we continue operation even if we lose? Where does the market supply curve come from? How do entries and exits affect our output and your profits in the long run?

6 Monopoly What are the characteristics of this market structure? What are the implications of these characteristics for a monopoly? What are the natural sources of monopoly power? What are the “created” sources of monopoly power?

7 Managing a Monopoly How should we maximize profits or minimize losses? –Where does the quantity come from? –Where does the price come from? –Should we continue operation even if we lose? What if we manage a multi-plant monopoly? How is the long run different from the short run in this market structure?

8 Other issues What are the arguments against monopoly? –What is the dead weight loss of monopoly? What are the arguments for monopoly?

9 Monopolistic Competition Environment What are the characteristics of this market structure? What are the implications of these characteristics for a firm operating in this market?

10 Managing a firm in a monopolistically competitive market How should we maximize profits or minimize losses? –Where does the price come from? –Where does the quantity come from? –Should we continue operation even if we lose? –How much should we advertise? How do we adjust to the changes in the market in the long run?

11 Other issues Is this market structure good for consumers? Why? Is it good for society in general? Why? Is it good for the firm? Why?