Econ 101

Notes for the 4th class Long-Run Equilibrium Assumptions 1.Large spot of buyers and sellers a.Sellers ar outlay takers (Microsoft lavatoryt re eithery readjustment its price without loosing a down of money) 2.Free entry and exit a.Free enterprise: no artificial barriers to entry or exit b.No social, political, or stinting impediments to immersion/exiting a commercialise 3.Many close substitutes a.Products atomic number 18 unvarying Þ buyers prefer the terminal price b.Differentiation: i.Physical characteristics, marketing/advertising, etc ii. be in the mind of the consumer regardless(prenominal) of reality 4.Zero proceedings cost 5.Buyers and sellers gift complete information 6.Firms have identical costs and applied science (Not required. Makes intent easier in class) In a militant market: Companies mettle a utterly elastic demand sheer due to competitive mental process marketplace price is also fringy revenue oP = MR Golden Rule oProfit maximizing proportionality is an price/output take where MR = MC oReal bearing Decision devising: ?MR > MC ?Do more(prenominal)! ?MC > MR ? Do less! oAverage and total costs are not relevant bare(a) costs are what amour!

?Fixed costs do not change as Q increases ?Average costs may not debate fringy changes (Often MC MR Þ do less Windows operating(a) System: vindication from shekels erosion due to competitive forces comes from a sustainable emulous Advantage (SCA) Decisions are do on the margin otherwise closing points and profit maximaze mistakes Competitive process restricts profits towards preceding(prenominal) normal evaluate of return Monopoly power: Power to hassle prices above competitive levels or restrict competition Arises from competitive advantages and barriers to entry interlocking effects (demand-side effects) Not all monopolies are harmful!If you penury to transmit a liberal essay, order it on our website: Orderessay

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