《管理经济学与商业策略 Managerial Economics & Business Strategy》教学资源（PPT课件讲稿，英文版）Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics Business strategy Chapter 8 Managing in Competitive, Monopolistic, and monopolistically competitive Markets Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Overview I. Perfectly Competition Characteristics and profit outlook Effect of new entrants II. Monopolies a Sources of monopoly power Maximizing monopoly profits Pros and cons III Monopolistic Competition Profit maximization ■ Long run equilibrium Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Overview I. Perfectly Competition  Characteristics and profit outlook  Effect of new entrants II. Monopolies  Sources of monopoly power.  Maximizing monopoly profits.  Pros and cons III. Monopolistic Competition  Profit maximization  Long run equilibrium

Perfect competition many buyers and sellers Homogeneous product Perfect information No transaction costs Free entry and exit Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Perfect Competition • Many buyers and sellers • Homogeneous product • Perfect information • No transaction costs • Free entry and exit

Key implications Firms are price takers'(P=Mr) In the short-run, firms may earn profits or losses Long-run profits are zero Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Key Implications • Firms are “price takers” (P = MR) • In the short-run, firms may earn profits or losses • Long-run profits are zero

Unrealistic? Why Learn? Many small businesses are price-takers, and decision rules for such firms are similar to those of perfectly competitive firms It is a useful benchmark Explains why governments oppose monopolies Iluminates the"danger'"to managers of competitive environments Importance of product differentiation Sustainable advantage Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Unrealistic? Why Learn? • Many small businesses are “price-takers,” and decision rules for such firms are similar to those of perfectly competitive firms • It is a useful benchmark • Explains why governments oppose monopolies • Illuminates the “danger” to managers of competitive environments  Importance of product differentiation  Sustainable advantage

Managing a Perfectly Competitive firm (or Price-Taking Business) Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Managing a Perfectly Competitive Firm (or Price-Taking Business)

Setting Price Market Firm Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Setting Price Firm Qf $ Df Market QM $ D S P e

Setting Output MR=MC MR=P therefore Set p=mc to maximize profits Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Setting Output: • MR = MC • MR = P, therefore • Set P = MC to maximize profits

Graphically Profit=(Pe-ATC)×Q MC ATC AVc pe=Df= MR ATC Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 Graphically $ Qf ATC AVC MC P e = Df = MR Qf* ATC P e Profit = (P e - ATC)  Qf*

A Numerical Example GI Iven P=$10 C(Q)=5+Q Optimal Price? P=$10 Optimal Output? MR=P=$10 and MC=2Q 10=2Q Q=5 units Maximum profits? PQ-C(Q=(10(5)-(5+25)=$20 Michael R Baye, Managerial Economics and Business Strategy, 3e. CThe McGraw-Hill Companies, Inc, 1999

Michael R. Baye, Managerial Economics and Business Strategy, 3e. ©The McGraw-Hill Companies, Inc. , 1999 A Numerical Example • Given  P=$10  C(Q) = 5 + Q2 • Optimal Price?  P=$10 • Optimal Output?  MR = P = $10 and MC = 2Q  10 = 2Q  Q = 5 units • Maximum Profits?  PQ - C(Q) = (10)(5) - (5 + 25) = $20