Market Structures

Chapter 8
Different Form  Perfect Competition
 Monopolistic Competition
of Market  Oligopoly
Structures  Monopoly
 Large Number of Buyers
and Sellers
Perfectly
Competitive Homogenous Products
Market
Price Taker
Examples of Perfectly Competitive Market
Monopoly Market
Characteristics
of Monopoly
Examples of
Monopoly
Examples of Monopolistic Competition
  A monopolistic competitive industry has
the following features:

 Many firms.
Characteristic  Freedom of entry and exit.

s of  Firms produce differentiated products.

 Firms have price inelastic demand; they are
Monopolistic price makers because the good is highly
differentiated
Competition  Firms make normal profits in the long run but
could make supernormal profits in the short
term
 Firms are allocatively and productively
inefficient.
 OLIGOPOLY
 An oligopoly is an industry dominated by a few large firms.
 PERFECTLY
COMPETITIVE MARKET
Consumer
Surplus,
Producer
Surplus and
Marginal Marginal Revenue (MR)= d(TR)/dQ


 Marginal Cost (MC)= d(TC)/dQ

Revenue,  Profit (q)= TR-TC= R(q)- C(q)

Marginal Cost  Profit is maximized when an additional

increment to output leaves profit
and Profit unchanged
MR= MC is the profit maximizing
Maximization

condition for any firm
Demand and  Individual Demand Curve is a
Horizontal Straight Line
Marginal  Demand curve also equals the AR and
Revenue For a MR curve
 Market Demand curve however is
Competitive downward sloping

Firm
Demand Curve, Average Revenue and
Marginal Revenue Curve
Short Run Profit Maximizing Condition by
a competitive firm
Competitive Firm Short Run Supply Curve
Short Run Industry Supply Curve
Long Run Profit Maximization
Industry Long Run Supply Curve

 Constant Cost Industry

 Increasing Cost Industry

 Decreasing Cost Industry

Constant Cost Industry