Chapter 6 Production Decisions in a Perfectly Competitive Market
Production Decisions in a Perfectly Competitive Market Chapter 6
Chapter 6 ■ Production Cost a Production decisions in a perfectly competitive market
Chapter 6 ◼ Production ◼ Cost ◼ Production decisions in a perfectly competitive market
Production decisions in other market structures Monopoly Monopolistic competition Oligopoly
Production decisions in other market structures ◼ Monopoly ◼ Monopolistic Competition ◼ Oligopoly
Perfect Competition Perfectly competitive market: all participants are price-takers a Perfectly competitive industry: all producers are price-takers Price-taker: whose action has no effect on market prIce a Price-taking producer: market price does not change because of the quantity he sells a Price-taking consumer: market price does not change because of the amount he buys
Perfect Competition ◼ Perfectly competitive market: all participants are price-takers ◼ Perfectly competitive industry: all producers are price-takers ◼ Price-taker: whose action has no effect on market price ◼ Price-taking producer: market price does not change because of the quantity he sells. ◼ Price-taking consumer: market price does not change because of the amount he buys
Perfect Competition: Characteristics a Many buyers and sellers and each is so small that no one can affect price individually (for sellers, no one has large enough market share) All firms produce a homogeneous product (identical / standardized) at least consumers think so a Free entry and exit each firm has complete knowledge about production and cost; no regulation limit
Perfect Competition: Characteristics ◼ Many buyers and sellers and each is so small that no one can affect price individually (for sellers, no one has large enough market share) ◼ All firms produce a homogeneous product (identical / standardized) at least consumers think so ◼ Free entry and exit each firm has complete knowledge about production and cost；no regulation limit