Chương 9 Cạnh tranh hoàn hảo và độc quyền: Các trường hợp hạn chế của cơ cấu thị trường ppsx

Chapter 9
Perfect competition and monopoly:
The limiting cases of market structure
David Begg, Stanley Fischer and Rudiger Dornbusch, Economics,
6th Edition, McGraw-Hill, 2000
Power Point presentation by Peter Smith
9.2
Perfect competition

many buyers and sellers
–
so no individual believes that their own
action can affect market price

firms take price as given
–
so face a horizontal demand curve

the product is homogeneous

perfect customer information

free entry and exit of firms
Characteristics of a perfectly competition market
9.3
The supply curve under perfect competition (1)

Above price P
3

(point C), the firm

makes profit above
the opportunity
cost of capital in
the short run

At price P
3
,
(point C), the firm
makes NORMAL
PROFITS
P
1
£
Output
SAVC
SMC
Q
1
SATC
P
3
A
C
Q
3
9.4
The supply curve under perfect competition (2)

Between P

1
and P
3
, (A
and C), the firm makes
short-run losses, but
remains in the market

Below P
1
(the SHUT-
DOWN PRICE), the
firm fails to cover
SAVC, and exits
P
1
£
Output
SAVC
SMC
Q
1
SATC
P
3
A
C
Q
3
9.5

The supply curve under perfect competition (3)

So the SMC curve
above SAVC
represents the
firm’s SHORT-RUN
SUPPLY CURVE
–
showing how much
the firm would
produce at each
price level.
P
1
£
Output
SAVC
SMC
Q
1
SATC
P
3
A
C
Q
3
9.6
The firm and the industry in the short
run under perfect competition (1)

INDUSTRY
Output
£
Q
P
SRSS
D
Firm
SAC
P
£
Output
SMC
D=MR=AR
q
Market price is set at industry level at the intersection of
demand and supply
– the industry supply curve is the sum of the individual firm’s
supply curves.
9.7
The firm and the industry in the short
run under perfect competition (2)
INDUSTRY
Output
£
Q
P
SRSS
D
SAC

Firm
P
£
Output
SMC
D=MR=AR
q
The firm accepts price as given at P
– and chooses output at q where SMC=MR to maximize profits
9.8
The firm and the industry in the short
run under perfect competition (3)
INDUSTRY
Output
£
Q
P
SRSS
D
SAC
Firm
P
£
Output
SMC
D=MR=AR
q
At this price, profits are shown by the shaded area.
These profits attract new entrants into the industry.
As more firms join the market, the industry supply curve shifts

to the right, and market price falls.
SRSS
1
P
1
9.9
Long-run equilibrium
INDUSTRY
Output
£
Q
P*
SRSS
D
Firm
SAC
P*
£
Output
SMC
D=MR=AR
q*
LRSS
The market settles in long-run equilibrium when the typical
firm just makes normal profit by setting LMC=MR at the minimum
point of LAC. Long-run industry supply is horizontal.
If the expansion of the industry pushes up input prices (e.g. wages)
then the long-run supply curve will not be horizontal, but upward-sloping.
9.10
Adjustment to an increase in market demand:

the short run
Suppose a perfectly
competitive market starts
in equilibrium at P
0
Q
0
.
If market demand shifts to
D'D'
Output
£
D
SRSS
Q
0
P
0
D
D'
D'
in the short run the new
equilibrium is P
1
Q
1

– adjustment is through
expansion of individual
firms along their SMCs.

Q
1
P
1
9.11
Adjustment to an increase in market demand:
the long run
In the long run, new firms
are attracted by the profits
now being made here
Output
£
D
SRSS
Q
0
P
0
D
D'
D'
Q
1
P
1
– and firms are able to
adjust their input of fixed
factors
If wages are bid up by this
expansion, the long-run

supply schedule is upward-
sloping
LRSS
And the market finally
settles at P
2
Q
2
.
Q
2
P
2
9.12
Monopoly

A monopolist:
–
is the sole supplier of an industry’s
product

and the only potential supplier
–
is protected by some form of barrier to
entry
–
faces the market demand curve directly
–
Unlike under perfect competition, MR is
always below AR.

9.13
AC
1
shown by the shaded area
Profit maximization by a monopolist
Profits are maximized
where MC = MR at Q
1
P
1
.
In this position, AR is
greater than AC
so the firm makes
profits above the
opportunity cost of
capital
Entry barriers prevent
new firms joining the
industry.
Output
£
P
1
Q
1
MC
AC
D = AR
MR

MC=MR
9.14
Comparing monopoly with perfect
competition (1)
Suppose a competitive industry is taken over by a monopolist:
Output
D
MR
SRSS
LRSS
£
Q
1
P
1
A
Competitive equilibrium
is at A, with output Q
1
and price P
1
.
To the monopolist, LRSS
is the LMC curve, and
SRSS is the SMC curve
= LMC
=SMC
The monopolist
maximizes profits in the
short run at MR = SMC

at P
2
Q
2
.
Q
2
P
2
9.15
Comparing monopoly with perfect
competition (2)
Suppose a competitive industry is taken over by a monopolist:
Output
D
MR
SRSS
LRSS
£
Q
1
P
1
A
= LMC
=SMC
Q
2
P
2

In the long run, the
firm can adjust
other inputs
to set MR = LMC
At P
3
Q
3
.
P
3
Q
3
9.16
Comparing monopoly with perfect
competition (3)

So we see that monopoly compared
with perfect competition implies:
–
higher price
–
lower output

Does the consumer always lose from
monopoly?
–
Among other things, this depends on
whether the monopolist faces the same
cost structure

–
there may be the possibility of
economies of scale.
9.17
A natural monopoly

This firm enjoys
substantial economies of
scale relative to market
demand

LAC declines right up to
market demand

the largest firm always
enjoys cost leadership

and comes to dominate
the industry

It is a NATURAL
MONOPOLY
LMC
LAC
D
MR
P
1
£
Q

1
Output
9.18
Discriminating monopoly

Suppose a monopolist supplies two
separate groups of customers
–
with differing elasticities of demand

e.g. business travellers may be less sensitive
to air fare levels than tourists

The monopolist may increase profits by
charging higher prices to the
businessmen than to tourists.

Discrimination is more likely to be
possible for goods that cannot be resold

e.g. dental treatment