IGCSE Economics Theory of the firm Theory of the firm.

IGCSE Economics Theory of the firmIGCSE Economics Theory of the firm

Theory of the firmTheory of the firm


What is profit?What is profit?

Accounting profitAccounting profit


ObjectivesObjectives

To explain an economists view of profitTo explain an economists view of profit

To describe the main features of monopoly To describe the main features of monopoly and perfect competitionand perfect competition

To explain why Governments may want to To explain why Governments may want to limit the power of monopolistslimit the power of monopolists

To describe possible advantages of To describe possible advantages of monopolies.monopolies.



Accounting profit: Revenue – CostsAccounting profit: Revenue – Costs

Economics (as always) needs to take into Economics (as always) needs to take into Opportunity Cost.Opportunity Cost.



Accounting profit: Revenue – CostsAccounting profit: Revenue – Costs

Economics (as always) needs to take into Economics (as always) needs to take into Opportunity Cost.Opportunity Cost.

Normal profitNormal profit

AbnormalAbnormal (super-normal) (super-normal) profitprofit


A sliding scale….A sliding scale….

Monopoly Perfect Competition

Increasing number of firms

OligopolyMonopolistic Comp


MonopolyMonopoly

What is a monopoly?What is a monopoly?


MonopolyMonopoly


What are ‘barriers to entry?What are ‘barriers to entry?


MonopolyMonopoly



Why might Governments wish to limit the Why might Governments wish to limit the power of monopolists?power of monopolists?


MonopolyMonopoly



Why might Governments wish to limit the Why might Governments wish to limit the power of monopolists?power of monopolists?

Are there any Are there any positive externalitiespositive externalities from from being a monopolist?being a monopolist?


Perfect CompetitionPerfect Competition

What are the characteristics of perfect What are the characteristics of perfect competition?competition?


Perfect CompetitionPerfect Competition

What are the characteristics of perfect What are the characteristics of perfect competition?competition?Why does it lead to only normal profit? Why does it lead to only normal profit? (Technically, in the short run it can mean abnormal profit)(Technically, in the short run it can mean abnormal profit)


OligopoliesOligopolies

Oligopo what?Oligopo what?




Interdependence: - The prisoners Interdependence: - The prisoners dilemma, and game theorydilemma, and game theory





CollusionCollusion





CollusionCollusion

Examples?Examples?


Imperect (or monopolistic) Imperect (or monopolistic) competitioncompetition

What?What?


Imperect (or monopolistic) Imperect (or monopolistic) competitioncompetition

What?What?

ExamplesExamples


Imperfect (or monopolistic) Imperfect (or monopolistic) competitioncompetition

What?What?

ExamplesExamples

ResultsResults

IGCSE Economics Theory of the firm Theory of the firm.

Documents

Transcript of IGCSE Economics Theory of the firm Theory of the firm.