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Pure Competition Chapter 10
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Chapter 23 Table 23.1 Four types of Market Organization
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P = MR for a Perfectly Competitive Firm
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Chapter 23 Table 23.2
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In a Perfectly Competitive Market, the firm is a Price Taker
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Chapter 23 Figure 23.1
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Chapter 23 Table 23.3
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Chapter 23 Figure 23.2
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Maximizing Profit in Pure Competition Profit maximum occurs When total revenue exceeds total costs by the greatest amount This occurs where the slopes of total cost and total revenue are equal
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Chapter 23 Table 23.4
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Profit Maximum in Perfect Competition Equivalent to finding equal slopes for TR & TC MR = MC For a firm in a perfectly competitive market MR = P therefore MR = P = MC
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Chapter 23 Figure 23.3
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Short-run v. Long-run Economic Profit Firms maximize short-run economic profit In the long run, existence of short-run profits attract new market entrants, i.e., more competitors driving down prices ensuring zero long-run economic profit
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Chapter 23 Table 23.5 Loss-minimizing Output
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Chapter 23 Figure 23.4 Loss-minimizing Output
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Chapter 23 Figure 23.5 Shutdown Condition
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Chapter 23 Table 23.6
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Chapter 23 Figure 23.6 Marginal Cost and Firm Supply
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Chapter 23 Table 23.7 Market Equilibrium
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Chapter 23 Figure 23.7(a) Short-run Competitive Equilibrium for the Firm
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Chapter 23 Figure 23.7(b) Short-run Competitive Equilibrium for the Industry and the Market
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Chapter 23 Table 23.8 The Perfectly Competitive Firm’s Output Decision
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Chapter 23 Figure 23.8(a) Temporary Profits Attract New Firms
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Chapter 23 Figure 23.8(b) Resulting in Lower Prices
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Chapter 23 Figure 23.9(a) Short-run Losses Drive Firms Out
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Chapter 23 Figure 23.9(b) Driving Prices Back Up
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Chapter 23 Figure 23.10 Long-run Supply is Perfectly Elastic for a Constant-cost Industry
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Chapter 23 Figure 23.11 Long-run Supply for an Increasing-cost Industry
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Chapter 23 Figure 23.12 Long-run Equilibrium for a Perfectly Competitive Firm
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Efficiency and Pure Competition Productive Efficiency P = Min ATC Allocative Efficiency P = MC Underallocation implied by P > MC Overallocation implied by P < MC
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Consumer Surplus Perfect Competition Divides Surplus Value (Subjective) more or less equally between Consumers and Producers Provides Maximum Consumer Surplus consistent with keeping the good in production
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