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Market Structure Wrap-Up

Market Structure Wrap-Up. Chapter 15, 16, &17. Upcoming Test. Unit Test Chapters 15,16 & 17 Block Day- Free Response (90 pts) Block Day – Multiple Choice (100 pts) Study Guide due Block Day. 4 Market Structures. Maximize Profit When:. MR = MC. MR = MC. MR = MC. MR = MC.

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Market Structure Wrap-Up

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  1. Market Structure Wrap-Up Chapter 15, 16, &17

  2. Upcoming Test • Unit Test Chapters 15,16 & 17 • Block Day- Free Response (90 pts) • Block Day – Multiple Choice (100 pts) • Study Guidedue Block Day

  3. 4 Market Structures Maximize Profit When: MR = MC MR = MC MR = MC MR = MC Equilibrium Price vs. MC P = MC P > MC P > MC P > MC Perfect Competition Monopolistic Competition Oligopoly Monopoly Long Run Economic Profit Yes No No Yes MC MC MC Demand & Marginal Revenue Curve MC D = MR No DWL Lowest Px Highest Qty Largest DWL Highest Px Lowest Qty End Result:

  4. 3 Market Structures Competitive Markets P > MC P > min of ATC P = MC (always) P = min of ATC (long run) (Efficient Scale Production) Efficiency Review • Allocative Efficiency whenP = MC • 3 market structures fail as P > MC (monopoly, oligopoly, monopolistic competition) • Only Competitive firms are Allocatively Efficient • Production Efficiency whenP = min. of ATC • 3 market structures fail as P > min of ATC (efficient scale production) • Competitive Firms achieve it only in long run

  5. Intro: Game Theory Wrap Up Dominant Strategy- best strategy for one player regardless of what the other player chooses Enforceable Equilibrium- is a stable “market” equilibrium. No incentive to move/cheat! Nash Equilibrium – a combination of strategies that each choose “best” choice in response to the other’s choice. • Every dominant strategy is a Nash Equilibrium • Not every Nash equilibrium isa dominant strategy!

  6. Unit Elastic Elastic range Inelastic Range D MR Elasticity Review ● ----------------- Firms will: • Operate only in Elastic Portion of Demand • Elasticity = 1 when MR = 0 => TR at maximum

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