1944355
Description
Mind Map by veronika.salla, updated more than 1 year ago
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Created by veronika.salla
almost 10 years ago
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IB Economics: Theory of the Firm -
Market Structure
- Perfect Competition
- Assumptions:
- - Large number of firms
- - Homogeneous products
- - No barriers to entry/exit
- - Symmetrical/perfect info
- - Perfect resource mobility
- - Perfect resource mobility
- - Symmetrical/perfect info
- - No barriers to entry/exit
- price-taker
- - Homogeneous products
- - Large number of firms
- Price competition only
- Exists theoretically
- Short Run
- Abnormal profit
- Normal profit
- Loss
- Abnormal profit
- Long Run
- Normal profit
- Normal profit
- Effeiciency
- AE: leads to P=MC
- PE: leads to MC=ATC
- AE: leads to P=MC
- Assumptions:
- Monopoly
- Assumptions
- - Only 1 firm
- - Unique product
- - Significant barriers to entry/exit
- e.g. legal, resources, branding, asymmetric info
- e.g. legal, resources, branding, asymmetric info
- - Significant barriers to entry/exit
- price-maker
- - Unique product
- - Only 1 firm
- No/weak competition
- contrained by demand
- contrained by demand
- Short Run
- Abnormal profit
- Normal profit
- Loss
- Abnormal profit
- Long Run
- usually same as SR
- due to barriers
- due to barriers
- usually same as SR
- Inefficient
- Demand: Inelastic
- Assumptions
- Monopolistic Competition
- Assumptions
- - Large number of firms
- - No barriers to entry/exit
- - Product differentiation
- close substituted
- close substituted
- - Product differentiation
- price-maker
- less than oligopoly & monopoly
- less than oligopoly & monopoly
- - No barriers to entry/exit
- - Large number of firms
- Price competition & non-price competition
- Short Run
- Loss
- Normal profit
- Abnormal profit
- Loss
- Long Run
- Normal prfit
- Normal prfit
- Inefficient
- Demand: elastic
- Demand: perfectly elastic
- Assumptions
- Oligopoly
- Assumptions
- - Small number of firms (2-12)
- - Both homogeneous and differentiated products
- Considerable barriers to entry/exit
- e.g. start-up costs
- e.g. start-up costs
- Considerable barriers to entry/exit
- some have large market share
- price-maker (less than monopoly)
- price-maker (less than monopoly)
- - Both homogeneous and differentiated products
- - Small number of firms (2-12)
- Mutually independent
- strategic behaviour
- conflicting incentives
- collusion & competing
- collusion & competing
- strategic behaviour
- Non-price competition
- Short Run
- Abnormal profit
- Normal profit
- Loss
- Abnormal profit
- Long Run
- Abnormal profits available if cartels succeed
- Abnormal profits available if cartels succeed
- Inefficienct
- Kinked demand curve
- top: elastic
- bottom: inelastic
- bottom: inelastic
- top: elastic
- Assumptions
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