Chapter Twenty-Two Firm Supply
Chapter Twenty-Two Firm Supply
Firm Supply How does a firm decide how much product to supply?This depends upon the firm's ●technology ●narket environment ●goals competitors'behaviors
Firm Supply ◆How does a firm decide how much product to supply? This depends upon the firm’s ⚫ technology ⚫ market environment ⚫ goals ⚫ competitors’ behaviors
Market Environments Are there many other firms,or just a few? Do other firms'decisions affect our firm's payoffs? +ls trading anonymous,in a market? Or are trades arranged with separate buyers by middlemen?
Market Environments ◆Are there many other firms, or just a few? ◆Do other firms’ decisions affect our firm’s payoffs? ◆Is trading anonymous, in a market? Or are trades arranged with separate buyers by middlemen?
Market Environments Monopoly:Just one seller that determines the quantity supplied and the market-clearing price. +Oligopoly:A few firms,the decisions of each influencing the payoffs of the others
Market Environments ◆Monopoly: Just one seller that determines the quantity supplied and the market-clearing price. ◆Oligopoly: A few firms, the decisions of each influencing the payoffs of the others
Market Environments Dominant Firm:Many firms,but one much larger than the rest.The large firm's decisions affect the payoffs of each small firm.Decisions by any one small firm do not noticeably affect the payoffs of any other firm
Market Environments ◆Dominant Firm: Many firms, but one much larger than the rest. The large firm’s decisions affect the payoffs of each small firm. Decisions by any one small firm do not noticeably affect the payoffs of any other firm
Market Environments Monopolistic Competition:Many firms each making a slightly different product.Each firm's output level is small relative to the total. Pure Competition:Many firms,all making the same product.Each firm's output level is small relative to the total
Market Environments ◆Monopolistic Competition: Many firms each making a slightly different product. Each firm’s output level is small relative to the total. ◆Pure Competition: Many firms, all making the same product. Each firm’s output level is small relative to the total
Market Environments Later chapters examine monopoly, oligopoly,and the dominant firm. This chapter explores only pure competition
Market Environments ◆Later chapters examine monopoly, oligopoly, and the dominant firm. ◆This chapter explores only pure competition
Pure Competition A firm in a perfectly competitive market knows it has no influence over the market price for its product. The firm is a market price-taker. The firm is free to vary its own price
Pure Competition ◆A firm in a perfectly competitive market knows it has no influence over the market price for its product. The firm is a market price-taker. ◆The firm is free to vary its own price
Pure Competition If the firm sets its own price above the market price then the quantity demanded from the firm is zero. If the firm sets its own price below the market price then the quantity demanded from the firm is the entire market quantity-demanded
Pure Competition ◆If the firm sets its own price above the market price then the quantity demanded from the firm is zero. ◆If the firm sets its own price below the market price then the quantity demanded from the firm is the entire market quantity-demanded
Pure Competition So what is the demand curve faced by the individual firm?
Pure Competition ◆So what is the demand curve faced by the individual firm?