Kinh tế vi mô FTU - Lecture 11 12 13

Motivation: Why did Forever 21 shut down? Microeconomics December 1, 2019 1 / 92 Motivation: Does monopoly in water supply improve quality of water? Microeconomics December 1, 2019 2 / 92 Chapter 6: Market Structures December 1, 2019 Microeconomics December 1, 2019 3 / 92 Content 1 Introduction to market structures 2 Perfectly competitive market 3 Monopoly market 4 Imperfectly competitive market Monopolistic competition Oligopoly Microeconomics December 1, 2019 4 / 92 Introduction to market structures Definition of market Market is a group of buyers and sellers of a particular good or service Classification of market structures Number of firms Types of goods (Identical, similar or differentiated) Barriers to Entry (and Exit) Control over price (price setter, price maker, and price taker) Microeconomics December 1, 2019 5 / 92 Market types Microeconomics December 1, 2019 6 / 92 Perfectly competitive market 1 What is perfect competition? 2 Characteristics of a perfectly competitive market 3 Demand and marginal revenue for a competitive firm 4 Choosing output in the short run 5 The competitive firm’s and market’s short-run supply curve 6 Choosing output in the long run 7 The industry’s long-run equilibrium and supply curve Microeconomics December 1, 2019 7 / 92 What is perfect competition (competitive market) ? Perfectly competitive market A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker Characteristics of the market There are many buyers and many sellers in the market. The goods offered by the various sellers are largely the same. Firms can freely enter or exit the market. Microeconomics December 1, 2019 8 / 92 (a) Demand curve facing the firm (b) Market demand curve Microeconomics December 1, 2019 9 / 92 (a) Demand curve facing the firm (b) Market demand curve In (a) the demand curve facing the firm is perfectly elastic. In (b) the market demand curve is downward sloping. A perfectly competitive firm supplies only a small portion of the total output of all the firms in an industry → the firm takes the market price of the product as given, choosing its output on the assumption that the price will be unaffected by the output choice. Microeconomics December 1, 2019 10 / 92