100 likes | 216 Views
Contemporary Economics: An Applications Approach By Robert J. Carbaugh 3nd Edition. Chapter 5: Competition and Monopoly: Virtues and Vices. 15. 14. 13. 12. 11. 10. 9. 8. 7. 6. 5. 4. 3. 2. 1. 0. 0. 1,400,000. 2,800,000. Quantity of fish (lbs.). Perfect Competition.
E N D
Contemporary Economics:An Applications ApproachBy Robert J. Carbaugh3nd Edition Chapter 5: Competition and Monopoly: Virtues and Vices
15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 0 0 1,400,000 2,800,000 Quantity of fish (lbs.) Perfect Competition Market equilibrium facing competitive firm Price Market supply Market demand Carbaugh, Chap. 5
70 15 14 63 13 56 12 11 49 10 42 9 8 35 7 28 6 5 21 4 14 3 2 7 1 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 0 2 4 6 8 10 12 Quantity of fish (lbs.) Quantity of fish (lbs.) Perfect Competition Demand and revenue for a competitive firm Demand and Marginal Revenuefor one company Total revenue $ $ Total revenue Demand = P = MR 7 1 Carbaugh, Chap. 5
8.00 9.00 8.00 7.00 7.00 6.00 6.00 5.00 5.00 4.00 4.00 3.00 3.00 2.00 2.00 1.00 1.00 0.00 0.00 0 3000 0 500 1000 1500 2000 2500 3000 3500 Quantity of fish (lbs.) Quantity of fish (lbs.) Perfect Competition Short-run economic profit/loss for a competitive firm Profit maximization Loss minimization $ $ MC Total loss = $2,128 MC Demand= P = MR A ATC ATC 5.33 AVC Demand= P = MR Total profit = $2,500 700 1600 Carbaugh, Chap. 5
6 6 4 4 2 2 0 0 0 2000 0 Quantity of fish (lbs.) Quantity of fish (lbs.) Perfect Competition Short-run supply curves for a competitive firm and market Individual firm's supply curve Market supply curve $ $ Firm's short-run supply curve Market's short-run supply curve MC Supply AVC 700 1600 700,000 1,600,000 Carbaugh, Chap. 5
7 7 6 6 5 5 4 4 0 0 Quantity of fish (lbs.) Quantity of fish (lbs.) Perfect Competition Long-run adjustments for a competitive firm: effects of market entry Market Individual firm Price S0 Price and cost S1 Demand0 = Price0 LRATC A Demand1 = Price1 D0 500 Carbaugh, Chap. 5
6 6 5 5 4 4 3 3 0 0 Quantity of fish (lbs.) Quantity of fish (lbs.) Perfect Competition Long-run adjustments for a competitive firm: effects of market exit Market Individual firm Price S1 Price and cost LRATC S2 A Demand1 = Price1 Demand2 = Price2 D0 500 Carbaugh, Chap. 5
13¢ 12¢ 11¢ 10¢ 9¢ 8¢ 7¢ 6¢ 0 1 2 3 4 5 6 7 8 Million KWHs Monopoly Economies of scale and natural monopoly Hypothetical electric utility's cost curve B A ATC Carbaugh, Chap. 5
4,400 4,000 3,600 3,200 2,800 2,400 2,000 1,600 1,200 800 400 0 0 1 2 3 4 5 6 7 8 9 10 11 12 Quantity of diamonds Monopoly Price and marginal revenue for a monopolist Demand and revenue schedules for a monopolist $ Quantity Price Total Marginal (dollars) Revenue Revenue 0 4,000 0 0 1 3,600 3,600 3,600 2 3,200 6,400 2,800 3 2,800 8,400 2,000 4 2,400 9,600 1,200 5 2,000 10,000 400 6 1,600 9,600 -400 Demand = Price MR Carbaugh, Chap. 5
4400 4400 4000 4000 3600 3600 3200 3200 2800 2800 2400 2400 2000 2000 1600 1600 1200 1200 800 800 400 400 0 0 0 1 2 3 4 5 6 7 8 9 10 11 0 1 2 3 4 5 6 7 8 9 10 11 Quantity of Diamonds Quantity of Diamonds Monopoly Profit maximization/loss minimization for a monopolist Profit maximization Loss minimization $ $ Losses = $1,600 Profits = $3,200 MC MC A ATC A B ATC AVC C B Demand = Price Demand = Price MR MR Carbaugh, Chap. 5