101 lecture 17 oligopoly
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Transcript of 101 lecture 17 oligopoly
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DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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60
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80
90
100
0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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60
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90
100
0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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50
60
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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90
100
0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
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0 1 2 3 4 5 6 7 8 9 10
DMR
ATCMC
Quiz 8 Name_____________ ID ________
1. What Q will maximize profits?2. What is total revenue?3. What is profit?
Profit
![Page 13: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/13.jpg)
Perfect Competition
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Perfect Competition$
Quantity
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P
Perfect Competition$
Quantity
Demand=MR
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P
Perfect Competition$
Quantity
Demand=MR
1. MR=MC?
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P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
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P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
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Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?
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Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q
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Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q
Total Revenue
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Q
P
Perfect Competition
Marginal CostMC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
Total Revenue
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
Demand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
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Q
P
Perfect Competition
Marginal CostMC Average Cost
ATC
Total Cost
$
Quantity
ProfitDemand=MR
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
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Monopoly$
Q
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Monopoly$
Q
Demand
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Marginal Revenue MR
Monopoly$
Q
Demand
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Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
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Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
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Marginal CostMC
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
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Marginal CostMC
Q
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
![Page 36: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/36.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?
![Page 37: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/37.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly$
Q
Demand
1. MR=MC?2. TR= P x Q
![Page 38: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/38.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q
![Page 39: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/39.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
![Page 40: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/40.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
![Page 41: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/41.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
![Page 42: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/42.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
![Page 43: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/43.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q
![Page 44: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/44.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 45: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/45.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 46: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/46.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 47: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/47.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 48: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/48.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 49: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/49.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
![Page 50: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/50.jpg)
Marginal CostMC
Q
P
Marginal Revenue MR
Monopoly
Average CostATC
Cost
$
Q
Profit
Demand
Deadweight Loss
Consumer Surplus
1. MR=MC?2. TR= P x Q3. TC=ATC x Q4. Profit =TR-TCor (P-ATC) x Q
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Q
$Short Run
DMR
Monopolistic Competition
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Q
$Short Run
DMR
MC
Monopolistic Competition
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Q
$Short Run
DMR
MC
Monopolistic Competition
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Q
$Short Run
DMR
MC
QS
Monopolistic Competition
![Page 55: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/55.jpg)
Q
$Short Run
DMR
MC
QS
Monopolistic Competition
![Page 56: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/56.jpg)
Q
$Short Run
DMR
MC
QS
PS
Monopolistic Competition
![Page 57: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/57.jpg)
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
![Page 58: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/58.jpg)
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
![Page 59: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/59.jpg)
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
![Page 60: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/60.jpg)
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
![Page 61: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/61.jpg)
Q
$Short Run
DMR
MC
ATCProfit
QS
PS
Monopolistic Competition
![Page 62: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/62.jpg)
Q
$Short Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
![Page 63: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/63.jpg)
Q
$Short Run
Long Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
![Page 64: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/64.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
![Page 65: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/65.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
![Page 66: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/66.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
![Page 67: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/67.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
![Page 68: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/68.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
![Page 69: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/69.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
![Page 70: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/70.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
![Page 71: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/71.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
![Page 72: 101 lecture 17 oligopoly](https://reader034.fdocuments.net/reader034/viewer/2022051413/559aaa2b1a28ab7a1c8b46f4/html5/thumbnails/72.jpg)
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
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Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
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Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
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Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
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Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
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Q
$
Monopolistic Competition
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
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Q
$
Monopolistic Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
QLR
PLR
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Microeconomics
Oligopoly
Few to Sell
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PerfectCompetition
MonopolyMonopolisticCompetition
Oligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Brands Similar
Ease of Entry Easy Blocked Easy Hard
Demand D = MR D > MR Dynamic Game Theory
ExamplesCommodities
RiceApples
UtilitiesGovernment
BrandsCokeApple
STC-MobilyHyperPanda
Danube
Pairs
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Collusion Dominant Strategy Nash Equilibrium Cooperative Equilibrium Non-cooperative Equilibrium
Key Terms
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Oligopoly
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Oligopoly
Small number of interdependent firms
compete
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Oligopoly
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Oligopoly
Cannot use usual methods
Demand curves not obviousComplex Strategy
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Oligopoly
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Oligopoly
Don’t know Demand Curve
Don’t know Marginal Revenue curve
Don’t know where to find profit maximization point
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Eddie
Willie
Betrays
Willie1 Year
Silent
Silent
Betrays
Eddie1 Year
EddieGoes Free
Willie10 Years
WillieGoes Free
Eddie10 Years
Willie5 Years
Eddie5 Years
Prisoner's
Dilemma
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Prisoner's Dilemma
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Prisoner's Dilemma
Pursuing the Dominant Strategy Results in Non-Cooperation
and Leaves Everyone Worse Off
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Game Theory
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Game Theory
RulesStrategies
Payoffs
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John Nash(1928 - )
Game TheoryNash Equilibrium
Nobel 1994
A Beautiful Mind
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Duoploy
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Duoploy
Two Sellers
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Profits Attract
Competition
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Five Competitive Forces
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Five Competitive Forces
Existing Firms Potential Firms
Substitutes Buyers
Suppliers
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100
150Mobily1,000
150
STC1,000
100
Mobily500
Mobily2,000
Mobily700
STC2,000
STC500
STC700