1 / 6

Basic Market Concepts

Basic Market Concepts. Shutdown Rule P > AC, making a  AVC < P < AC, SR loss, maybe OK P < AVC, shutdown. Profit Maximizing Quantity where MC = MR Market Power ability to set the market price HH Index (Sum of squares of Market Share). Factors that determine Market Structure.

aminia
Download Presentation

Basic Market Concepts

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Basic Market Concepts • Shutdown Rule • P > AC, making a  • AVC < P < AC, SR loss, maybe OK • P < AVC, shutdown. • Profit Maximizing Quantity • where MC = MR • Market Power • ability to set the market price • HH Index (Sum of squares of Market Share)

  2. Factors that determine Market Structure • Number of Buyers and Sellers • Barriers to Entry / Exit • Regulation (patent etc.) • Sole Ownership • Scale Economies (Natural Monopolies) • Are the Products Homogenous / Differentiated

  3. 4 Market Structures

  4. Characteristics of the 4 Market Structures

  5. Oligopoly: Strategic Behavior • Barriers to entry that can lead to oligopoly. • The prisoner’s dilemma model. • Game theory analyzes behavior of oligopolists. • Equilibrium may differ in games • with repeated plays • played only once. • Explicit and implicit collusion. • Why and when cheating is likely in a cartel. • Forces operating to restrict and reduce the extent of oligopoly in the economy.

  6. A Summary of Market Structures

More Related