9th may elearning

8/4/2019 9th May Elearning

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9th May E-learning Tutorial Part (a): Overview of Market

Structure

Watch the following video: http://www.youtube.com/watch?v=9Hxy-TuX9fs

Answer the following questions:

1) How can you identify a market structure? ________________________

From your notes: write down the definition of market structure:

_________________________________________________________________________

2) There is a ____________ of market structures.

3) Explain the 3 characteristics of a perfectly competitive (PC) market.

a) A large number of firms mean

________________________________________________

_________________________________________________________________________

b) _________________________________________________________________________

_________________________________________________________________________

c) _________________________________________________________________________

_________________________________________________________________________

4) From your notes: what are the other 2 characteristics of a PC market?

_____________________ and ___________________________

5) What is the definition of market power?

___________________________________________
http://www.youtube.com/watch?v=9Hxy-TuX9fshttp://www.youtube.com/watch?v=9Hxy-TuX9fs


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6) What are the 3 characteristics of a monopoly market?

a. _______________ b. __________________ c. ____________________

7) What is the relationship between the characteristics of market structures and

market power?

_____________________________________________________________________________

_____________________________________________________________________________

8) Which characteristic do you think is the most significant determinant of

market power?

_______________________

Why???

9) What are the 3 characteristics of a monopolistically competitive market?

a. ________________ b. __________________ c. ____________________

10) What lesson about the topic of market structure can you learn

from the toothbrush example?

_____________________________________________________________________________


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Please dont tell me that you discovered glow-in-the-dark toothbrushes or

toothbrushes that indicate when you need to change them.

11) What is different about the oligopoly market as compared to other

markets?

______________________________________________________________________________

12) Answer the question in the video. Give one real-life example not

mentioned in the video of each market structure and explain why using

the characteristics provided.

In the video, you realize the characteristics of the different market

structures affect the market power of the firm in each market structure,

as well as how competitive the market is. In essence, the characteristics

of the market structure will affect how firms behave in each market, in

terms of price, output and other non-price strategies. From their behavior,

we can then assess the performance of the firms within each market in

terms of efficiency, choice, equity, innovation and overall welfare to

society. For an overall picture of market structure, please see mindmap in

lecture notes.


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9th May E-learning Tutorial Part (b): Introduction to Perfect

Competition (PC)

Watch the following video: http://www.youtube.com/watch?

v=61GCogalzVc&feature=related

Answer the following questions:

1) What is the significance of having perfect information in a PC market?

_____________________________________________________________________________

2) What is the purpose of having industry-wide campaigns?

_____________________________________________________________________________

3) What are the 2 outcomes of the characteristics of the market?

________________________________ and ______________________________

Classify the two above into behavior of firm vs. performance of firm

4) The PC firm will price at _____________________________________ and is therefore

a ____________________________.

5) Using the video, answer the two questions on pg 38 of your lecture notes.

6) Therefore, the PC firms demand curve is _____________________________

(relate to earlier topic)

Everyone! Please differentiate between the firms demand curve and the industrys

demand curve!

7) The PC firm cannot choose its ________________ but it can choose its

_______________. The PC firm will produce at the

____________________________________

8) What is the definition and formula of marginal revenue?

____________________________________________________________________________

9) Why is price equal to marginal revenue for the PC firm?

____________________________________________________________________________

10) At 6.36, the video says positive profits are earned. What do we call

these profits?

____________________________
http://www.youtube.com/watch?v=61GCogalzVc&feature=relatedhttp://www.youtube.com/watch?v=61GCogalzVc&feature=relatedhttp://www.youtube.com/watch?v=61GCogalzVc&feature=relatedhttp://www.youtube.com/watch?v=61GCogalzVc&feature=related


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11) In the long run, the video says that a PC firms profits are always equal

to zero. What do we call these profits?

____________________________

You have been given an example where AR > ATC in the short-run and the

firm earns positive economic profits. Now, draw the industry DD/SS

diagram and the cost/revenue diagram of the PC firm, indicating when the

firm earns subnormal profits in the short-run.

(i) Indicate clearly the equilibrium price, p*.

(ii) Indicate clearly the profit-maximizing output, q*.

(iii)Indicate clearly area of TR and TC andthe area of subnormal profits.

(iv) What will happen in the long-run with the freedom of entry and exit by

firms?

________________________________________________

What happens to the industry supply? Show this on the diagram.

(v) Prove that the long-run equilibrium of the firm is: at output q*, ATC=AR and

output q* occurs at the minimum point of the ATC curve.

A third case is that the PC firm may earn exactly normal profits in the

short-run.


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In the next tutorial, after we complete Costs of Production, we will move on to

the short-run shut down condition of the PC firm. We have now covered Pg 15 to

20 of COP notes and until Pg 40 of Market Structure notes

Now, do you think that it is possible for firms in other market structures to have

supernormal profits, subnormal profits or normal profits in the short-run? Shoulda firm in the oligopolistic or monopolistic industry earn supernormal profits, what

will happen to the firm in the LR?

9th may elearning

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