Econ 101

Notes for the 4th class Long-Run Equilibrium Assumptions 1.Large number of buyers and sellers a.Sellers ar outlay takers (Microsoft cant really adjustment its terms without loosing a lot of money) 2.Free entry and exit a.Free enterprise: no artificial barriers to entry or exit b.No social, political, or save impediments to entering/exiting a marketplace 3.Many close substitutes a.Products are undifferentiated Þ buyers prefer the lowest price b.Differentiation: i.Physical characteristics, marketing/advertising, etc ii. be in the mind of the consumer regardless of reality 4.Zero transactions cost 5.Buyers and sellers bribe complete information 6.Firms have identical be and applied science (Not required. Makes intent easier in class) In a competitive market: Companies mettle a perfectly elastic demand ignore due to competitive process Market price is in any case marginal revenue oP = MR Golden Rule oProfit maximizing proportionality is an price/output level where MR = MC oReal bearing termination Making: ?MR > MC ?Do more! ?MC > MR ? Do less! oAverage and total cost are not pertinent Marginal costs are what matter!

?Fixed costs do not change as Q increases ?Average costs may not debate marginal changes (Often MC MR Þ do less Windows Operating System: vindication from profit wearing away due to competitive forces comes from a sustainable Competitive avail (SCA) Decisions are made on the margin otherwise termination points and profit maximaze mistakes Competitive process restricts profits towards preceding(prenominal) normal prise of return Monopoly power: Power to raise prices above competitive lev els or restrict competition Arises from com! petitive advantages and barriers to entry web effects (demand-side effects) Not all monopolies are harmful!If you hope to transmit a full essay, order it on our website: OrderEssay.net

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