Contents:Contents:The advantages and disadvantages of perfect competition Introduction of our team membersOur topicPerfectly competitive marketPerfect competition and efficiencyA firm maximizes its profit in a perfectly competitive marketConclusionOur team members:Our team members:Leader: 许梦娣 Member: 桑卡罗高玉琳李佳乐罗莹赵丽云3Firms in Perfectly Competitive Firms in Perfectly Competitive MarketsMarketsMARKET STRUCTURECHARACTERISTICPERFECT COMPETITIONMONOPOLISTIC COMPETITIONOLIGOPOLYMONOPOLYNumber of firmsType of productEase of entryExamples of industriesManyIdenticalHigh Wheat ApplesMany DifferentiatedHigh Selling DVDs RestaurantsFewIdentical or differentiated Low Manufacturing computers Manufacturing automobilesOneUniqueEntry blocked First-class mail delivery Tap water1Many buyers and sellersThe perfect competition is believed to be the The perfect competition is believed to be the most efficient for a market most efficient for a market 23All firms selling identical productsNo barriers to new firms entering the market15The Market Demand for Wheat versus the Demand or One Farmers WheatA Perfectly Competitive Firm A Perfectly Competitive Firm Cannot Affect the Market PriceCannot Affect the Market PricePrice takerPrice takerLOGOThe perfect competition is believed to be the most efficient for a market Point one : The productive efficiency - It refers to the situation in which a good or service is produced at the lowest possible cost For instance : the market for DVD players The perfect competition is The perfect competition is believed to be the most believed to be the most efficient efficient for a market for a market 1Many buyers and sellersThe perfect competition is believed to be the The perfect competition is believed to be the most efficient for a market most efficient for a market 23All firms selling identical productsNo barriers to new firms entering the market .1 Point two : Allocative Efficiency firms will produce a good up to the point where the marginal cost of producing another unit is equal to the marginal benefit consumers receive from consuming that unit . these statements are another way of saying that entrepreneurs in a market system efficiently allocate labor , machinery ,and other inputs to produce the goods and services that best satisfy consumer wants .In this sense , perfect competition achieves allocative efficiency .Optimal allocation of resourcesCompetition encourages efficiencyNo collusion between sellers and buyersNo violenceAdequate information and participants ,Sufficient resources12345Advantages of perfect Advantages of perfect competition for a firm:competition for a firm:Disadvantages:Disadvantages:A perfectly competitive firm can not affect the market price.Having a small scale and no ability to make a breakthrough of technology.Lacking of competition over product design and specification.231LOGOHow a Firm Maximizes Profit in a Perfectly Competitive MarketProfit = TR - TC Profit maximizing condition: MR = MC Marginal revenue (MR) Change in total revenue from selling one more unit.P = AR = MR14Way 1: Way 1: Profit Maximization in Profit Maximization in Perfect CompetitionPerfect CompetitionTR550$2,8002,100TCSlope = 400Quantity Cost and revenue12345678910Maximum Profit = $700Lieberman Introduction to Economics, 200515Way 2: Way 2: Profit Maximization in Profit Maximization in Perfect CompetitionPerfect CompetitionMC$400D = MRQuantity Price and cost1234567891016Way 3: Profit Maximization in Way 3: Profit Maximization in Perfect Competition Perfect Competition Market price: PP - ATCd = MRMCATCEconomic ProfitOunces of Gold per DayDollars12345678Total profit =(P ATC)LOGODeciding Whether to Produce or to Shut Down in the Short Run and Long Run In the short run a firm suffering losses has choices of1:Continue to produce2:Stop production by shutting down temporarilyThe Supply Curve of the Firm in The Supply Curve of the Firm in the Short Runthe Short RunShutdown point The minimum point on a firms average variable cost curve; if the price falls below this point, the firm shuts down production in the short run. P = AVC ECONOMIC PROFIT LEADS TO ENTRY OF NEW FIRMS. The Effect of Entry on Economic ProfitsEconomic Profit and the Entry Economic Profit and the Entry or Exit Decisionor Exit Decision The Effect of Exit on Economic LossesThe Effect of Exit on Economic The Effect of Exit on Economic Losses (contd)Losses (contd) The Long-Run Supply Curve in a Perfectly Competitive MarketLong-Run Equilibrium in a Long-Run Equilibrium in a Perfectly Competitive MarketPerfectly Competitive MarketLOGOYour company slogan in hereThank You!