1. Perfect Competition
Ap Micro 10/10

2. Warm Up
Candy Simulation– Try to be the firm that makes the most revenue (but note, I will only be buying one candy from each group)!!!

3. Four Market Models Perfect (pure) competition Monopoly
Monopolistc competition
Oligopoly

4. Perfect Competition Very large number of firms
Firms produce a standardized products (all the same thing, ex. Wheat, tomatoes)
New firms can enter or exit the industry very easily
Not one producer has a large market share

5. Monopoly One firm is the sole seller of a good or service
Entry of additional firms is blocked
One firm = entire industry
Illegal in the U.S.

6. Monopolistic Competition
Relatively large number of sellers
Firms produce differentiated products
Non price competition – firms attempt to distinguish its product from competitors on the basis of attributes like design and quality
Entry and exit is easy

7. Oligopoly Few sellers of a standardized or differentiated product
Each firm is affected by the decisions of its rivals and must take those decisions into account in determining price and output

9. Discuss Are the following examples of perfectly competitive markets?
There are 2 producers of aluminum in the world, a good sold in many places.
The price of natural gas is determined by global supply and demand. A small share of that global supply is produced by a handful of companies located in the North Sea.
Dozens of designers sell high-fashion clothes. Each designer has a distinctive style and a loyal clientele.
There are many baseball teams in the US, one or two in each major city, and each selling tickets to its home-town events. No
Yes No No

10. Perfect Competition—Price Takers
Individual firms do not exert control over the product price
Every firm sells a small fraction of total (identical) output
Changing individual firm output will not influence the market
At the mercy of the market
Cannot change market price, only adjust to it

11. Demand
Demand schedule faced by an individual firm in a purely competitive industry is perfectly elastic at the market price

12. Average, Total, and Marginal Revenue
The demand schedule is also its average revenue schedule.
Total revenue = Price (or average revenue) * Quantity
Marginal revenue – the change in total revenue resulting from selling one additional unit of output
In pure competition, marginal revenue = price = average revenue