When you finish this chapter, you should: Define the key terms of economics and opportunity cost and understand how a production possibilities frontier exemplifies the trade-offs that exist in life, distinguish between increasing and constant opportunity cost and understand why each might happen in the real world, analyze an argument by thinking economically, while recognizing and avoiding logical traps. | Lecture Issues in economics today - Chapter 6 Chapter 6 Perfect Competition Monopoly and Economic vs. Normal Profit McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Chapter Outline From Perfect Competition to Monopoly Supply Under Perfect Competition McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. From Perfect Competition to Monopoly Perfect Competition Monopolistic Competition Oligopoly Monopoly McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Picking the Quantity to Maximize Profit P P MC ATC MC AVC ATC P MR P AVC D MR Q Q Q Q Many Competitors No Competitors McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Characteristics of Perfect Competition a large number of competitors such that no one firm can influence the price the good a firm sells is indistinguishable from the ones its competitors sell firms have good sales and cost forecasts there is no legal or economic barrier to its entry into or exit from the market McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Monopoly The sole seller of a good or service. Some monopolies are generated because of legal rights patents and copyrights . Some monopolies are utilities gas water electricity etc. that result from high fixed costs. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Monopolistic Competition Monopolistic Competition a situation in a market where there are many firms producing similar but not identical goods. Example the fast-food industry. McDonald s has a monopoly on the Happy Meal but has much competition in the market to feed kids burgers and fries. McGraw Hill Irwin 2002 The McGraw Hill Companies Inc. All Rights Reserved. Oligopoly Oligopoly a situation in a market where there are very few discernible competitors Examples Satellite TV service Direct TV Primestar Dish Network Airlines American Delta etc. McGraw Hill Irwin 2002 The McGraw Hill .
