5/31/2023

CHAPTER 6
MARKET STRUCTURE
▪ Thị trường; 1. Market and market classification
▪ Thị trường cạnh tranh hoàn hảo (CTHH);
▪ Perfect competition;
2. quyền;
Thị trường độc
▪ Thị trường cạnh tranh không hoàn hảo.
3. Monopoly;
4. Imperfect competition (Monopolistic
competition; Oligopoly).

1. Market and market classification

1.1. Definition
Market - A group of buyers and sellers of a particular
good or service
Buyers Sellers

Market

1. Market and market classification

1.2. Types
Depending on…………………:
• Perfect competition
• Monopoly
• Imperfect competition (Monopolistic
competition; Oligopoly)

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1.2. Types
Type of No.of Product Market Entry How to
Example
market sellers feature power barrier compete

Perfect Coffee
competition vendors

Monopolistic Shampoo
competition suppliers

Oligopoly Airlines

Monopoly EVN

2. Perfect competition
2.1. Characteristics;
2.2. The firm’s demand and marginal
revenue curve
2.3. Producing in the short run;
2.4. Producing in the long run.

2.1. Characteristics
Perfectly
Perfectly
competitive
competitive firm
market
Number of
Great many
sellers
Product
Identical
features

Market power None ……………………

Entry barrier None ……………………

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2.2. The firm’s D curve and MR curve

The firm is a……………….
 Firm’s demand curve is ………………………………
P
(S)

(d)
PMK

(D)
Q q
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Market Firm

MR – Marginal revenue AR – Average revenue

the change in total revenue
from an additional unit sold
Perfectly competitive firm:
MR = P
total revenue divided by
the quantity sold
AR = TR/q = P.q/q = P
Perfectly competitive firm:
AR = P

Perfectly competitive firm: MR = AR = P

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Calculating TR, AR, MR

Fill in the empty spaces of the table.

Q P TR AR MR

0 $10 n/a

1 $10 $10

2 $10

3 $10

4 $10 $40
$10
5 $10 $50

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Perfectly competitive firm: MR = AR = P

P
(S)
(d) ≡ (MR)≡ (AR)
PMK

(D)
Q q
Market Firm

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2.3. Producing in SR
The firm’s supply decision
The firm’s supply curve
Producer surplus

• The number of firms in the market is fixed in the

short run
• A firm produces at the output that maximizes the
profit or minimizes the loss

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The firm’s supply decision

$
MC
To maximize profit:
MR = MC = P P*
(d)≡(MR)≡(AR)

q
q*
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MC
TR = SP*Aq*0
$ TC = SCBq*0
A (d)≡(MR)
P* II > 0
AC
P* > ACmin:
C B Continue
ACmin
to operate

q* q
0

TR = S……..
-
$ MC TC = S……...

AC
II =
ACmin P* = ACmin:
(d)
P* ………………
A ≡(MR)

………………

q* q
0

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TR = S………..
MC
-
$ AC TC = S………..
II = ……
B
C AVC
P* AVCmin < P* < ACmin:
A (d)≡(MR) …….

q* q
0

$ MC
AC
TR = S………..
C B -
AVC TC = S………..
………..
P* < AVCmin:
A AVCmin (d)
P* ≡(MR)
Shut down

q
0 q*

The firm’s supply curve

Costs
The MC curve determines
the firm’s Q at any price. MC
Firm produces at the point
where ATC
MR = MC = P ≥ AVCmin
AVC
 The firm’s SR supply
curve is the portion of its
MC curve above AVC.

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Q

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Market supply curve

Example: 1000 identical firms
At each P, market Qs = 1000 x (one firm’s Qs)

One firm Market

P MC P S
P3 P3

P2 P2
AVC
P1 P1
Q Q
10 20 30 (firm (market)
)
10,000 20,000 30,000
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Producer surplus (PS)

To a perfectly competitive firm,
Producer surplus is the amount a seller
is paid for a good minus the seller’s cost
of providing it.

PS = TR - ∑ MC

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Producer surplus (PS)

$
MC

P*
(d)≡(MR)
PS

q
q*
Perfectly competitive firm
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Producer surplus (PS)

To a perfectly competitive market,
producer surplus is the area below price
line and above the supply curve.

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2.6. Producer surplus (PS)

$
(S)

PMK
PS
(D)
q
QMK
Perfectly competitive market
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Total surplus
Total surplus—the sum of
……………………………
………—is the area
between……………………
…….up to
the…………………………

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2.4. Producing in LR
In the LR, the number of firms can change due to entry & exit.
If existing firms earn positive economic profit,
• new firms enter, market supply shifts right.
• P falls, reducing profits and slowing entry.
If existing firms incur losses,
• some firms exit, market supply shifts left.
• P rises, reducing remaining firms’ losses.

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To maximize profit:
MR = LMC = P

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LMC
$
A (d) TR = SP*Aq*0
P* ≡(MR)

C
+ LAC TC = SCBq*0
P*>LACmin:
B
LACmin New entrants

q* q
0

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LMC TR = SP*Aq*0
$ -
TC = SP*Aq*0
LAC II = 0
LACmin
(d)≡(MR) P* = LACmin
P*
A

q* q
0

TR = SP*Aq*0
$ -
LMC TC = S 0CBq*
LAC II < 0
B P* < LACmin:
C
P* - A
LACmin

(d)≡(MR)
Exit the market

q* q
0

Long-run equilibrium:
The process of entry or exit is complete—
remaining firms earn zero economic profit.

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One firm Market

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