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L19 Supply function, Entry and market structure. Today:  Partial equilibrium model (one industry)  Producers with cost functions  Questions -Equilibrium

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Producer: Cost curves pall

Text of L19 Supply function, Entry and market structure. Today:  Partial equilibrium model (one industry)...

L19 Supply function, Entry and market structure Today: Partial equilibrium model (one industry) Producers with cost functions Questions -Equilibrium with N firms -Free entry: How many firms (N)? Producer: Cost curves pall Optimal supply (price takers) pall Industry supply (N firms) Individual supply Aggregate supply S(p)? Equilibrium with N firms Demand for a good There are N identical firms in the industry Questions: 1.Equilibrium price (Market clearing) 2.Individual and aggregate production? 3.Profits (positive? zero?) 4.Should we expect entry? Equilibrium with N firms Assume 1.No licensing 2.No patents 3.No any other entry barrier Firms -enter when positive profit -leave when negative profit No entry or exit as long as -profit equal to zero Free Entry (Marshall) No entry condition Number of firms Equilibrium with free entry pall Fixed cost and entry pall Market structure Market structures categorized as Conceptual problem when N

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