1. L19 Supply function, Entry and market structure

2. Today:  Partial equilibrium model (one industry)  Producers with cost functions  Questions -Equilibrium with N firms -Free entry: How many firms (N)?

3. Producer: Cost curves pall

4. Optimal supply (price takers) pall

5. Industry supply (N firms)  Individual supply  Aggregate supply S(p)?

6. Equilibrium with N firms  Demand for a good  There are N identical firms in the industry  Questions: 1.Equilibrium price (Market clearing) 2.Individual and aggregate production? 3.Profits (positive? zero?) 4.Should we expect entry?

7. Equilibrium with N firms

8.  Assume 1.No licensing 2.No patents 3.No any other entry barrier  Firms -enter when positive profit -leave when negative profit  No entry or exit as long as -profit equal to zero Free Entry (Marshall)

9. No entry condition Number of firms Equilibrium with free entry pall

10. Fixed cost and entry pall

11. Market structure Market structures categorized as Conceptual problem when N<10 : - price taking controversial -need for a better model (market power) -monopoly, oligopoly pall N123-1010-… Name