16395140
Description
Mind Map by William Kim, updated more than 1 year ago
|
Created by William Kim
over 5 years ago
|
|
PERFECTLY COMPETITIVE MARKETS
- EXAMPLES
- Rice Farms
- Farming Activity
- Poultry Farming
- Rice Farms
- Price Taker
- Firms are Restrained from raising its price because consumers will find another competitor in the market with lower prices
- Many Firms
- Many buyers and firms exist to create the larger market
- Many buyers and firms exist to create the larger market
- Many Identical Products
- Relative Ease in Market Entry
- Meaning there are no barriers or walls preventing anyone from entering the market
- Meaning there are no barriers or walls preventing anyone from entering the market
- So How Do Firms Maximize Profit?
- Figuring out how much of a
product should be
produced
- Profit=TR-TC
- To maximize profits the firm
should produce the quantity
where the difference
between total revenue and
total cost is as large as
possible
- MR=(ΔTR)/(ΔQ)
- MR=(Change in total revenue)/(Change
in Quantity)
- MR=(Change in total revenue)/(Change
in Quantity)
- Total Profit= (p-ATC) x Q
- P>ATC, firm has
profit
- P=ATC,
breaks even
- P<ATC, firm
faces loses
- P>ATC, firm has
profit
- MR=(ΔTR)/(ΔQ)
- Profit=TR-TC
- What if the firm is
experiencing loses?
- Long-run decision
- Exit the Market
- Exit the Market
- Short-run decision
- Temporarily stop production
- If, Total Revenue < Variable Cost
- If, Total Revenue < Variable Cost
- Face Sunk Cost
- A fixed cost that is
unavoidable and
can't be recovered
- A fixed cost that is
unavoidable and
can't be recovered
- Continue to Produce
- If, Total Revenue >= Variable Cost
- If, Total Revenue >= Variable Cost
- Short-run supply curve
- Where MC and AVC
meet is the
shutdown point
- MC is the
supply curve
for firms in
SR
- P is the minimum price
where the firm can
continue to produce
- Where MC and AVC
meet is the
shutdown point
- Temporarily stop production
- Long-run decision
- Figuring out how much of a
product should be
produced
- Many Firms
- Firms are Restrained from raising its price because consumers will find another competitor in the market with lower prices
- Horizontal Demand Curve
- Because firms are selling the same
products they can sell as much as they
wants at that times current market
price but won't be able to if the price is
raised
- No matter the quantity sold by a
firm, no effect on the market
price will take place
- Because firms are selling the same
products they can sell as much as they
wants at that times current market
price but won't be able to if the price is
raised
- Resources used
- https://www.quora.com/What-is-a-horizontal-demand-curve-What-are-its-functions
- https://economics.stackexchange.com/questions/13037/is-the-marginal-cost-the-same-for-every-firm-in-a-perfectly-competitive-market
- https://slideplayer.com/slide/12635741/
- http://www.swlearning.com/economics/landsburg/landsburg5e/powerpoint/Ch07/sld004.htm
- http://www.swlearning.com/economics/landsburg/landsburg5e/powerpoint/Ch07/sld004.htm
- https://slideplayer.com/slide/12635741/
- https://economics.stackexchange.com/questions/13037/is-the-marginal-cost-the-same-for-every-firm-in-a-perfectly-competitive-market
- https://www.quora.com/What-is-a-horizontal-demand-curve-What-are-its-functions
- Prefect Competition Market
- Where
supply
and
demand
lines
meet is
the
equilibrium
- Where
supply
and
demand
lines
meet is
the
equilibrium
Media attachments
Want to create your own Mind Maps for free with GoConqr? Learn more.