Click to edit Master title style,Click to edit Master text styles,Second Level,Third Level,Fourth Level,Fifth Level,Harcourt,Inc.items and derived items copyright 2001 by Harcourt,Inc.,(微观经济学英文课件）Chap14 Firms in Competitive Markets,(微观经济学英文课件）Chap14 Firms in Com,A,market,is a group of buyers and sellers of a particular good or service.,4 types of,market?,perfectly competitive market,(,Perfect Competition,),Monopoly,Oligopoly,Monopolistic Competition,Markets,A market is a group of buyers,perfectly competitive market,characteristics:,many buyers and sellers.They have a negligible impact on the market price.,The goods are largely the same.,Firms can freely enter or exit the market.,a competitive firm is a,price taker,perfectly competitive marketch,Unit 1 Revenue of a Competitive Firm,Unit 2 The Firms Short-Run Decision,Unit 3 The Firms Long-Run Decision,Unit 4 Supply in a Competitive Market,Unit 1 Revenue of a Competitiv,TR(Q)=PQ,TR,AR=MR=P,Q,Unit 1 Revenue of a Competitive Firm,TR,AR,MR?,Marginal revenue,is the change in total revenue from an additional unit sold.,TR(Q)=PQTRAR=MR=PQUnit 1 Re,goal,The goal of a competitive firm is to,maximize profit.,total revenue-total cost,.,goalThe goal of a competitive,derivative,TRTC,TR,TC,Q,A,B,O,Q,0,TFC,derivative TRTCTRTCQABOQ0TFC,When MR MC,will,increase,Q,When MR MC,will increase Q,Profit,Q,Quantity,0,Price,P =AR=MR,AC,MC,P,AC,Profit-maximizing quantity,a.A Firm with Profits,When MR=MC,ProfitQQuantity0PriceP =AR=,Unit 2 The Firms Short-Run Decision,have FC and VC,Unit 2 The Firms Short-Run De,MC,AC,MR=AR,P,O,Q,E,（,zero-profit,）,Q,P,O,MC,AC,MR=AR,AC,MC,MR=AR,AVC,P,Q,O,AC,MC,P,Q,O,AVC,MR=AR,（,A,）,profit-maximizing,（,D,）,shut-down,（,B,）,zero-profit,（,C,）,loss minimizing,E,（,shut-down point,）,MCACMR=ARPOQE（zero-profit）QPOM,So.,Find MR=MC then Q,，,then find ARAC,When P AC,，,0.,When P=AC,，,=0.,when AVC P AC,，,0.but continue,(,ignore,sunk costs,),When P=AVC,Critical Point,Shut-down Point,P,AVC exit,So.Find MR=MC then Q，then fin,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.,The firm considers its,sunk costs,when deciding to exit,but ignores them when deciding whether to shut down.,Sunk costs,are costs that have already been committed and cannot be recovered.,In the zero-profit equilibrium,the firms revenue compensates the owners for the time and money they expend to keep the business going.,A shutdown refers to a short-r,short-run supply curve,deduce,：,P1,，,use MR=MC,find Q1,P2,，,use MR=MC,，,find Q2,connect,（,P,1,Q,1,）,(P,2,Q,2,）,so,：,PminAVC,This section MC curve is also the firms supply curve,O,Q,P,P1,P2,Q1,Q2,SMC,AR=MR=D,AVC,short-run supply curvededuce：O,Unit 3 The Firms Long-Run Decision,In the long-run,to Exit or Enter a Market,because no FC,so only AC,the firm,if P,AC,Enter,Unit 3 The Firms Long-Run Dec,Quantity,MC,AC,0,Costs,Firm enters,if P AC,Firm exits,if P AC,QuantityMCAC0CostsFirm enters,Quantity,MC,AC,0,Costs,Firms long-run supply curve,QuantityMCAC0CostsFirms long-,Market,Firm,Quantity,(firm),0,Price,MC,ATC,P,1,Quantity,(market),Price,0,D,1,P,1,Q,1,A,S,1,(a)Initial Condition(first market then firm),P,Why in a long-run P=MinAC,Suppose Increase in Demand in the Short Run.,MarketFirmQuantity0PriceMCATCP,D,2,Market,Firm,Quantity,(firm),0,Price,MC,ATC,P,1,Quantity,(market),Price,0,D,1,P,1,Q,1,A,S,1,(b)When increse in demand to D2 then Short-Run get the profit,Q,2,B,P,2,P,2,Profit,D2MarketFirmQuantity0PriceMCAT,Market,Firm,Quantity,(firm),0,Price,MC,ATC,P,1,Quantity,(market),Price,0,D,1,P,1,Q,1,A,S,1,(c)Profit induce entry to S2,so restoring Long-Rune quilibrium,D,2,B,Q,2,P,2,S,2,C,Q,3,MarketFirmQuantity0PriceMCATCP,So,In a market with free entry and exit,profits are driven to zero,in the long run.,So P=Min AC,In the zero-profit equilibrium,economic profit is 0,but accounting profit is positive.,SoIn a market with free entry,Unit 4 Supply in a Competitive,Market,Unit 4 Supply in a Competitive,The,Short,Run.,(a)Individual Firm Supply,Quantity,(firm),0,Price,(b)Market Supply,Quantity,(market),Price,0,Supply,MC,1.00,$2.00,100,200,1.00,$2.00,100,000,200,000,The Short Run.(a)Individual,The,Long,Run:.,(a)Firms Zero-Profit Condition,Quantity,(firm),0,Price,P,=,minimum,ATC,(b)Market Supply,Quantity,(market),Price,0,Supply,MC,ATC,The Long Run:.(a)Firms Zer,Why the Long-Run Supply Curve Might Slope Upward,Some resources used in production may be available only in limited quantities.(such as famers use land),Firms may have different costs.(first lower costs person enter,and then the higher cost person enter),Why the Long-Run Supply Curve,