McGraw-Hill/Irwin © 2002 The McGraw-Hill Companies, Inc., All Rights Reserved.
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
AVC
MC ATC
AVC
MR
Q*
P*
MR
D
MC
ATC
Q*
P*
P
Q
Many Competitors
P
Q
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