1. November 10, 2014 1.Lesson 3-5: Perfect Competition in the Short Run 2.Return Quizzes 3.HW: Activity 3-6 Profit Maximization by a Perfectly Competitive Firm ***Reminder: Unit 3 Exam is on 11/24 & 11/25***

2. Four Market Models LO1 Characteristic Pure Competition Monopolistic CompetitionOligopolyMonopoly Number of firmsA very large number ManyFewOne Type of productStandardizedDifferentiatedStandardized or differentiated Unique; no close subs. Control over price None- Price Taker Some, but within rather narrow limits Limited by mutual inter-dependence; considerable with collusion Considerable Conditions of entry Very easy, no obstacles Relatively easySignificant obstacles Blocked ExamplesAgricultureRetail trade, dresses, shoes Steel, auto, farm implements Local utilities 8-2

3. Pure Competition: Characteristics Firms are “Price takers” (have no say in it; can only adjust to it) Firm produces as much or little as they want at the market price. To the firm: Demand in perfect competition: perfectly elastic To the firm: Demand curve in perfect competition: horizontal line LO2 8-3

4. Average, Total, and Marginal Revenue LO3 Firm’s Demand Schedule (Average Revenue) Firm’s Revenue Data D = MR = AR TR PQDQD MR P $131 131 Q 1 2 3 4 5 6 7 8 9 10 $0 131 262 393 524 655 786 917 1048 1179 1310 $131 131 ] ] ] ] ] ] ] ] ] ] 8-4