4Long-Run Perfectly Competitive Equilibrium Price pMCLRACD0 = AR = MRp*MR = MCD1 = AR = MRp1Normal Profitq1Quantity, q
5Seminar Topic 1Is Competition good for firms? Is it good for consumers?
6Seminar Topic 2In what ways do markets characterised by perfect and imperfect competition differ?
7Imperfect Competition Relax assumption that products are homogenous.Firms have some ability to change price (market power).Less is sold at a higher price.Production is not at the lowest point of AC curve (i.e. not least cost production).
10Seminar Topic 3How realistic is perfect competition?
11Monopoly and Oligopoly Econ 206(A) Tutorial 7Monopoly and Oligopoly
12Relaxing Other Assumptions of Perfect Competition Focus on two related assumption:Small number of producers (or only one)Barriers to entry – include technology (patents), high fixed costs (setup costs), economies of scale.
13How can firms limit entry of other firms? Scale EconomiesLegal ProtectionStrategic ControlStrategic Behaviour (for instance price cutting)
14Monopoly & Oligopoly Pure definition = only 1 producer. Legal definition = firm with more than 25% share of the market.When there is only 1 firm, the firm’s and the industry demand curve are the same.Oligopoly where there are only a smallnumber of large firms.These firms demand curves depend on each others production choices (so there is potential for collusion and cartels).
15QuestionsHow is a natural monopoly different to other types of monopolies?Why might we want to regulate monopolies?
16Seminar Topics – Next Week Is the market always the most efficient solutions to the problem of resource allocation?What is meant by social opportunity cost? Provide examples.Should students contribute to the cost of their university education?