1. Supply function, Entry and market structure

2. Today: Partial equilibrium model (one industry)
Producers with cost functions
Questions
Equilibrium with N firms
Free entry: How many firms (N)?

3. Producer: Cost curves
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4. Optimal supply (price takers)
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5. Industry supply (N firms)
Individual supply
Aggregate supply S(p)?

6. Equilibrium with N firms
Demand for a good
There are N identical firms in the industry
Questions:
Equilibrium price (Market clearing)
Individual and aggregate production?
Profits (positive? zero?)
Should we expect entry?

7. Equilibrium with N firms
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8. Equilibrium with Free Entry
Assume
No licensing
No patents
No any other entry barrier
Firms
enter when positive profit
leave when negative profit
No entry or exit as long as
profit equal to zero
equilibrium price and y = MES

9. Equilibrium with free entry
No entry condition
Number of firms
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10. Market structure Market structures categorized as
Conceptual problem when N<10 :
- price taking controversial
need for a better model (market power)
monopoly, oligopoly N 1 2
3-10
10-…
Name
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