CHAPTER 11. PERFECT COMPETITION McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies,...
18
C H A P T E R 1 1
-
Upload
jason-sparks -
Category
Documents
-
view
238 -
download
0
Transcript of CHAPTER 11. PERFECT COMPETITION McGraw-Hill/IrwinCopyright © 2008 by The McGraw-Hill Companies,...
CH
AP
TE
R 1
1
CH
AP
TE
R 1
1
PERFECT COMPETITION
McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved.
11-3
The Shutdown Condition
Shutdown condition: if price falls below the minimum of average variable cost, the firm should shut down in the short run.
The short-run supply curve of the perfectly competitive firm is the rising portion of the short-run marginal cost curve that lies above the minimum value of the average variable cost curve
11-4
Profit Maximizing Output
11-5
Profit Maximizing Output, Part 2
11-6
Figure 11.4: The Short-RunSupply Curve of a Perfectly
Competitive Firm
11-7
Figure 11.5: The Short-Run Competitive Industry Supply
Curve
11-8
Figure 11.6: Short-Run Priceand Output Determination under
Pure Competition
11-9
Short-run Competitive Equilibrium
Even though the market demand curve is downward sloping, the demand curve facing the individual firm is perfectly elastic.
Breakeven point: the point at which price equal to the minimum of average total cost.
The lowest price at which the firm will not suffer negative profits in the short run.
11-10
Figure 11.7: A Short-RunEquilibrium Price that Results in
Economic Losses
11-11
The Efficiency Of Short-runCompetitive Equilibrium
Allocative efficiency: a condition in which all possible gains from exchange are realized.
11-12
Figure 11.8: Short-run Competitive Equilibrium is
Efficient
11-13
Producer Surplus
A competitive market is efficient when it maximizes the net benefits to its participants.
Producer surplus: the dollar amount by which a firm benefits by producing a profit-maximizing level of output.
11-14
Figure 11.9: Two Equivalent Measures
of Producer Surplus
11-15
Figure 11.10: AggregateProducer Surplus When Individual Marginal Cost Curves are Upward
Sloping Throughout
11-16
Figure 11.11: The Total Benefit from Exchange in a Market
11-17
Figure 11.12: Producer andConsumer Surplus in a Market Consisting of Careful Fireworks
Users
11-18
Figure 11.13: A Price Level that Generates Economic Profit
