• Pure competition
• Pure monopoly
• Monopolisitc competition
• Oligopoly

market structure in which thousands of firms each produce a tiny fraction of the market supply.

• very large number of firms
• no control over price
• very easy to enter

total revenue and total cost approach

marginal revenue and marginal cost approach

the amount of output the firm will supply at each price in a series of prices

It slopes upward because of the law of diminishing returns

zero

P=MR=MC= minimum ATC

• new firms will enter
• the market supply curve will shift right
• there will be downward pressure on the equilibrium price

• firms will only earn a normal profit
• firms in a purely competitive industry use the limited resources in a way to maximize the satisfication of consumers
• leads to allocative and production efficiency

• single supplier
• no close substitutes
• price maker
• blocked entry

• electricity
• Western Union
• De Beers
• Professional sports team
• Small town gas station

• Economies of Scale
• Legal barriers- licenses
• Ownership or control of resources
• Pricing

• extra benefit recieved above costs incurred
• actual price recieved more than minimum acceptable price

Pure Competition is ________

Pure Monopoly is _________

• large number of sellers
• Easy entry and exit
• differentiated products
• some control over price

Monopolistic Competition

P> min ATC> MC

Monopolistic Competition

P> min ATC> MC

• Very few large producers
• homogenous or differentiated products
• control over price
• entry bariers

non collusive oligopolist

little intiative to change price unless all do

assumption that rivals will match a price decrease, but not a price increase

mutually interdependent

set price based on own costs, own demand elasticity, and reactions of competitors

• Advertised Price Matching
• Advertised sales gaurantee
• public price lists
• price leadership

• not productively efficient (P> min ATC)
• not allocatively efficient (P> MC)
• tendency to share monopoly profit

• market pricing power
• market segregation
• no resale

ex. charging customers different prices- movie tickets (matinee)

MRP=MRC

marginal revenue product of labor equals the marginal resource cost of labor

the market wage rate

for each additional unit of labor hired, total labor costs increases by exactly the amount of the constant market wage rate

MRC=MRP

amount paid

Ex. amount paid per hour or salaries

• employer has buying power

• single buyer
• labor immobile
• firm "wage maker"
• firm labor supply upward slopping
• MRC higher than wage rate, buys less labor

people who specialize in certain careers

Ex. electritions, doctors

• restricts immigration
• exclusive unionism
• occupational licensing

• labor supply and demand
• MRP
• noncompeting groups
• ability and educational training
• compensating differences (trash man)

costs that affect a third party without compensation

Resources are overallocated

• Paying buyer cause D curve shift right
• Paying seller cause S- curve shift right

• asymmetric information
• inadequate buyer information
• inadequate seller information
• qualification

perscription drugs, licensing of surgeons, workplace hazards,workplace safety

higher % as I increases

personal income tax

lower % as I increases

sales tax, payroll tax, property tax

same % reguardleess of income

city tax

• get goods/ services not available otherwise
• increase the productivity of a country's resources and allow for economic growth

• imports exceed exports
• borrow from foreigners
• sell real assets to foreigners

• exports exceed imports
• lend to foreigners

company can produce more of a product than another country given its fixed resources

--more efficient production

country has a lower opportunity cost than that of another country -- more effective production

complete specialization, more of both goods, more efficient resource allocation

• export surplus
• export supply curve

• import shortage
• import supply curve

• decline in imports- foreign producers sell less
• governments gain revenue from tariffs
• increased domestic production in less efficient industries

• reduce effieciency and worlds real output
• competition is reduced in protected industries
• foreiners sell fewer imports to buy fewer exports
• firms using protected goods as inputs pay higher prices

• increased domestic employment
• cheap foreign labor
• protection-against-dumping

• General Agreement on tarrifs and trade
• 1947-1993

• world trade organization-1993
• GATTs succesor

• Trade agreement
• trade bloc
• freeze-trade zone

• north american free trade agreement
• 1993

• General Agreement on Tarrifs and Trade (GATT)
• World Trade Organization (WTO)
• European Union
• North-American Free Trade Agreement (NAFTA)