《管理经济学》第七章PPT课件.ppt

CompetitiveMarkets Chapter7 1 Chapter7OVERVIEW CompetitiveEnvironmentFactorsThatShapetheCompetitiveEnvironmentCompetitiveMarketCharacteristicsProfitMaximizationinCompetitiveMarketsMarginalCostandFirmSupplyCompetitiveMarketSupplyCurveCompetitiveMarketEquilibrium 2 Chapter7KEYCONCEPTS marketstructuremarketpotentialentrantproductdifferentiationcompetitivemarketsbarriertoentrybarriertomobilitybarriertoexitperfectcompetitionpricetakers normalprofiteconomicprofiteconomiclossesmarginalanalysiscompetitivefirmshort runsupplycurvecompetitivefirmlong runsupplycurve 3 CompetitiveEnvironment WhatisMarketStructure Marketstructureisthecompetitiveenvironment Numberofbuyersandsellers Potentialentrants Barrierstoentryandexit etc VitalRoleofPotentialEntrantsCompetitioncomesfromactualandpotentialcompetitors Potentialentrantsoftenaffectprice outputdecisions 4 FactorsthatShapetheCompetitiveEnvironment ProductDifferentiationR D innovation andadvertisingareimportantinmanymarkets ProductionMethodsEconomiesofscalecanprecludesmall firmsize EntryandExitConditionsBarrierstoentryandexitcanshelterincumbentsfrompotentialentrants BuyerPowerPowerfulbuyerscanlimitsellerpower 5 CompetitiveMarketCharacteristics BasicFeaturesManybuyersandsellers Producthomogeneity Freeentryandexit Perfectinformation ExamplesofCompetitiveMarketsAgriculturalcommodities Prominentmarketsforintermediategoodsandservices Unskilledlabormarket 6 ProfitMaximizationinCompetitiveMarkets ProfitMaximizationImperativeNormalprofitisreturnnecessarytoattractandmaintaincapitalinvestment Efficientfirmscanearnnormalprofit Inefficientfirmssufferlosses RoleofMarginalAnalysisSetM MR MC 0tomaximizeprofits MR MCwhenprofitsaremaximized 7 8 9 MarginalCostandFirmSupply Short runFirmSupplyCompetitivemarketprice P isshownasahorizontallinebecauseP MR Firm smarginal costcurveshowstheamountofoutputthefirmwouldbewillingtosupplyatanymarketprice Marginalcostcurveistheshort runsupplycurvesolongasP AVC 10 11 12 Long runFirmSupply Marginalcostcurveisthelong runsupplycurvesolongasP ATC Inlongrun firmmustcoverallnecessarycostsofproductionandearnanormalprofit 13 14 CompetitiveMarketSupplyCurve MarketSupplyWithaFixedNumberofCompetitorsSupplyisthesumofcompetitoroutput MarketSupplyWithEntryandExitEntryresultsinmorefirms increasedoutput arightwardshiftinthesupplycurve anddrivesdownpricesandprofits Exitreducesthenumberoffirms decreasesthequantityofoutput shiftsthesupplycurveleftward andallowspricesandprofitstoriseforremainingcompetitors 15 16 2020 1 15 17 18 CompetitiveMarketSupplyCurve EntryandexitincompetitivemarketswillcontinueuntilP AR MR MC ATC Thelong runcompetitivemarketsupplycurveisahorizontallineequaltothemarketprice Becausefirmscanmoreeasilyenterorexitinthelong run long runsupplycurvestendtobemoreelasticthanshort runsupplycurves 19 20 21 CompetitiveMarketEquilibrium BalanceofSupplyandDemandEquilibriumisabalanceofsupplyanddemand NormalProfitEquilibriumWithahorizontalmarketdemandcurve MR P P MR MC ATC Therearenoeconomicprofits Allfirmsearnanormalrateofreturn 22 23 Problems1 Floridaisthebiggestsugar producingstate butMichiganandMinnesotaarehometothousandsofsugarbeetgrowers SugarpricesintheUnitedStatesaverageabout20 perpound ormorethandoubletheworld wideaverageoflessthan10 perpoundgivenimportquotasthatrestrictimportstoabout15 oftheU S market Still theindustryisperfectlycompetitiveforU S growerswhotakethemarketpriceof20 asfixed Thus P MR 20 intheU S sugarmarket Assumethatatypicalsugargrowerhasfixedcostsof 30 000peryear Totalvariablecost TVC totalcost TC andmarginalcost MC relationsare 24 TVC 15 000 0 02Q 0 00000018Q2TC 45 000 0 02Q 0 00000018Q2MC TC Q 0 02 0 00000036QwhereQispoundsofsugar totalcostsincludeanormalprofit A Usingthefirm smarginalcostcurve calculatetheprofit maximizingshort runsupplyfromatypicalgrower B Calculatetheaveragevariablecostcurveforatypicalgrower andverifythataveragevariablecostsarelessthanpriceatthisoptimalactivitylevel 25 Problems2 Theretailmarketforunleadedgasolineisfiercelypricecompetitive Considerthesituationfacedbyatypicalgasolineretailerwhenthelocalmarketpriceforunleadedgasolineis 1 80pergallonandtotalcost TC andmarginalcost MC relationsare TC 40 000 1 64Q 0 0000001Q2MC MTC MQ 1 64 0 0000002QandQisgallonsofgasoline Totalcostsincludeanormalprofit 26 A Usingthefirm smarginalcostcurve calculatetheprofit maximizinglong runsupplyfromatypicalretailerB Calculatetheaveragetotalcostcurveforatypicalgasolineretailer andverifythataveragetotalcostsarelessthanpriceattheoptimalactivitylevel 27 Problems3 FarmFresh Inc suppliessweetpeastocannerieslocatedthroughouttheMississippiRiverValley Likemanygrainandcommoditymarkets themarketforsweetpeasisperfectlycompetitive With 250 000infixedcosts thecompany stotalandmarginalcostsperton Q are TC 250 000 200Q 0 02Q2MC TC Q 200 0 04Q 28 A Calculatetheindustrypricenecessarytoinduceshort runfirmsupplyof5 000 10 000 and15 000tonsofsweetpeas AssumethatMC AVCateverypointalongthefirm smarginalcostcurveandthattotalcostsincludeanormalprofit B Calculateshort runfirmsupplyatindustrypricesof 200 500 and 1 000perton 29 Problems4 NewEnglandTextiles Inc isamedium sizedmanufacturerofbluedenimthatsellsinaperfectlycompetitivemarket Given 25 000infixedcosts thetotalcostfunctionforthisproductisdescribedby TC 25 000 1Q 0 000008Q2MC TC Q 1 0 000016Q 30 whereQissquareyardsofbluedenimproducedpermonth AssumethatMC AVCateverypointalongthefirm smarginalcostcurve andthattotalcostsincludeanormalprofit A Derivethefirm ssupplycurve expressingquantityasafunctionofprice B DerivethemarketsupplycurveifNewEnglandTextilesisoneof500competitors C Calculatemarketsupplypermonthatamarketpriceof 2persquareyard 31 Problems5 BigAppleMusic Inc enjoysanexclusivecopyrightonmusicwrittenandproducedbytheFabFour alegendaryBritishrockgroup Totalandmarginalrevenuesforthegroup sCDsaregivenbythefollow