Unit 4 Imperfect Competition 1 REVIEW Name That
- Slides: 35
Unit 4: Imperfect Competition 1
REVIEW Name That Concept Rules: 1. Cannot use the word(s) 2. Focus on the concept not word Ex: Price Maker 2
Name That Concept 1. Monopoly 2. Imperfect Competition 3. Barriers to Entry 4. Dead Weight Loss 5. Productive Efficiency 3
Name That Concept 1. Marginal Revenue 2. MR = MC 3. Shut down rule 4. Natural Monopoly 5. Allocative Efficiency 4
Review: A monopoly produces where MR=MC, but charges the price set by the demand curve. How much is the TR, TC and Profit or Loss? P MC ATC $10 Profit =$20 9 8 7 6 D MR 5 16 17 18 19 20 Q 5
Elastic and Inelastic Range P Total Revenue Test If price falls and TR increases then demand is elastic. Inelastic $15 10 5 TR Total Revenue Test If price falls and TR falls then demand is inelastic. Elastic D 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 $64 40 20 1 2 3 4 5 6 7 8 Q A monopoly MR will only produce in the elastic range TR Q 6 9 10 11 12 13 14 15 16 17 18
Are Monopolies Efficient? 7
Monopolies are inefficient because they… 1. Charge a higher price 2. Don’t produce enough • Not allocatively efficiency 3. Produce at higher costs • Not productively efficiency 4. Have little incentive to innovate Why? Because there is little external pressure to be efficient 8
Monopolies vs. Perfect Competition Where is CS and PS for a monopoly? P CS S = MC Total surplus falls. Now there is DEADWEIGHT LOSS Pm PS D MR Qm Q 9
10
Regulating Monopolies 11
Why Regulate? Why would the government regulate an monopoly? 1. To keep prices low 2. To make monopolies efficient How do they regulate? • Use Price controls: Price Ceilings • Why don’t taxes work? • Taxes limit supply and that’s the problem 12
Where should the government place the price ceiling? 1. Socially Optimal Price P = MC (Allocative Efficiency) OR 2. Fair-Return Price (Break–Even) P = ATC (Normal Profit) 13
Regulating Monopolies Where does the firm produce if it is unregulated? P MC Pm ATC D MR Qm Q 14
Regulating Monopolies Price. Optimal Ceiling at Socially Optimal Socially = Allocative Efficiency P MC Pm Pso ATC D MR Qm Qso Q 15
Regulating Monopolies Price Ceiling Returnprofit Fair Return meansat no. Fair economic P MC Pm Pso Pfr ATC D MR Qm Qso Qfr Q 16
Regulating Monopolies Unregulated P Socially Optimal MC Fair Return Pm Pso Pfr ATC D MR Qm Qso Qfr Q 17
Regulating a Natural Monopoly What happens if the government sets a price ceiling to get the socially optimal quantity? P The firm would make a loss and would require a subsidy MC ATC Pso MR D Qsocially optimal Q 18
19
Price Discrimination 20
Price Discrimination Definition: Practice of selling the same products to different buyers at different prices Examples: • Airline Tickets (vacation vs. business) • Movie Theaters (child vs. adult) • All Coupons (spenders vs. savers) • CHS football games (students vs. parents) 21
PRICE DISCRIMINATION • Price discrimination seeks to charge each consumer what they are willing to pay in an effort to increase profits. • Those with inelastic demand are charged more than those with elastic Requires the following conditions: 1. Must have monopoly power 2. Must be able to segregate the market 3. Consumers must NOT be able to resell product 22
P Qd TR MR $11 0 0 - 23
Results of Price Discrimination $10 P Qd TR MR $11 0 0 $10 10 24
Results of Price Discrimination $10 P Qd TR MR $11 0 0 $10 10 $9 2 19 9 $10 $9 25
Results of Price Discrimination $10 $9 P Qd TR MR $11 0 0 $10 10 $9 2 19 9 $8 3 27 8 $8 26
Results of Price Discrimination $10 $9 $8 P Qd TR MR $11 0 0 $10 10 $9 2 19 9 $8 3 27 8 $7 4 34 7 $7 27
Results of Price Discrimination P Qd TR MR $11 0 0 $10 10 $9 2 19 $9 $8 3 27 $8 $7 4 34 $7 $6 5 40 $6 $5 6 45 $5 $4 7 49 $4 $10 $9 $8 $7 $10 $9 $8 $7 $6 $5 $4 28
$10 $9 P Qd TR MR $11 0 0 $10 10 $9 2 19 $9 $8 3 27 $8 WHEN PRICE $7 4 34 $7 $8 DISCIMINATING $6 5 40 $6 $8 $7 MR = D$5 6 45 $5 $4 7 49 $4 $8 $7 $6 $10 $9 $8 $7 $6 $5 $10 $9 $4 29
Regular Monopoly vs. Price Discriminating Monopoly P MC Pm ATC D MR Qm Q 30
A perfectly discriminating firm can charge each person differently so the Marginal Revenue = Demand P MC ATC D MR Q 31
A perfectly discriminating firm can charge each person differently so the Marginal Revenue = Demand Identify • Price • Profit • CS • DWL P MC ATC D =MR Qnm Q 32
A perfectly discriminating can charge each person differently so the Marginal Revenue = Demand Identify the Price, Profit, CS, and DWL P MC ATC D =MR Price Discrimination results in several prices, more profit, no CS, and a higher socially optimal quantity Q Q nm 33
Can You Do The Following? 1. Draw a monopoly making a profit at long-run equilibrium and identify price, quantity, and profit. 2. Draw a perfectly competitive industry AND firm at long-run equilibrium 3. Draw a price discriminating monopoly at equilibrium and label price, quantity, MR, and profit 34
I hope so because if you do, you can earn extra credit. +3 1. Draw a monopoly making a profit at long-run equilibrium and identify price, quantity, and profit. 2. Draw a perfectly competitive industry +3 AND firm at long-run equilibrium 3. Draw a price discriminating monopoly +3 at equilibrium and label price, quantity, MR, and profit Due tomorrow. 35
- Unit4 competitors
- Unit 10, unit 10 review tests, unit 10 general test
- Imperfect competition curve
- Imperfect competition
- The most extreme form of imperfect competition is
- Types of imperfect competition
- Monopoly vs perfect competition
- Monopoly vs monopolistic competition
- Pure competition vs monopolistic competition venn diagram
- Perfect competition vs monopolistic competition
- Phân độ lown
- Block nhĩ thất cấp 1
- Thể thơ truyền thống
- Thơ thất ngôn tứ tuyệt đường luật
- Walmart thất bại ở nhật
- Tìm độ lớn thật của tam giác abc
- Hãy nói thật ít để làm được nhiều
- Tôn thất thuyết là ai
- Gây tê cơ vuông thắt lưng
- Sau thất bại ở hồ điển triệt
- Name three line segments
- A quick review of perfect competition and monopoly
- Algebra 2 unit test
- Case competition team name
- Chapter review motion part a vocabulary review answer key
- Writ of certiorari ap gov example
- Nader amin-salehi
- What is inclusion and exclusion criteria
- Narrative review vs systematic review
- Unit 9 human body systems
- Unit 9 factoring review answers
- Geometry unit 8 test
- Unit 8 review logarithms
- Unit 7: lesson 5 - fast start
- World history unit 5 lesson 6
- Ap biology unit 2 review