1 / 18

University of Hawai‘i at Mānoa Department of Economics

University of Hawai‘i at Mānoa Department of Economics. ECON 130 (003): Principles of Economics (Micro) http://www2.hawaii.edu/~lindoj Gerard Russo Lecture #26 Thursday, April 15, 2004. ANNOUNCEMENTS. LAST LECTURE Tuesday, May 4, 2004, 12:00-1:15 PM, BIL 152 Review Session

Download Presentation

University of Hawai‘i at Mānoa Department of Economics

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. University of Hawai‘i at MānoaDepartment of Economics ECON 130 (003): Principles of Economics (Micro) http://www2.hawaii.edu/~lindoj Gerard Russo Lecture #26 Thursday, April 15, 2004

  2. ANNOUNCEMENTS • LAST LECTURE • Tuesday, May 4, 2004, 12:00-1:15 PM, BIL 152 • Review Session • Thursday, May 6, 4:30-5:30 PM, BIL 152 • FINAL EXAMINATION • Thursday, May 13, 2004, 12:00-2:00 PM, BIL 152

  3. Lecture 26 • Oligopoly • Dominant Firm Model • Introduction to Factor (Input) Markets

  4. Oligopoly • Few Firms • Price Makers (fringe takers) • Barriers to Entry • Homogeneous or Differentiated Product

  5. Dominant Firm/Price Leader Model of Oligopoly • One dominant firm acts as price leader. • Competitive fringe acts like price taking competitive firms. • Dominant firm takes the competitive fringe supply into consideration when maximizing profits by setting price.

  6. Residual Demand Curve $/Q Scf = ΣMCi Residual Demand Fringe Supply P0 Fringe Supply P1 Fringe Residual Demand P2 D Residual Demand 0 Q

  7. Residual Demand Curve $/Q Scf = ΣMCi P0 Residual Residual Demand D Residual Demand 0 Q

  8. Residual Demand Curve $/Q Scf = ΣMCi P0 Residual Residual Demand D Residual Demand 0 Q

  9. Residual Demand Curve $/Q Scf = ΣMCi DIndustry Ddominant firm 0 MRdominant firm Q

  10. Dominant Firm/Price Leader Model of Oligopoly $/Q Scf = ΣMCi MCdominant firm P* ATCdominant frim Ddominant firm DIndustry 0 Qcf Qdf QIndustry Q MRdominant firm

  11. Dominant Firm Model $/Q Scf = ΣMCi MCdominat firm P* ATCdominat frim 0 Qcf Qdf QIndustry Q

  12. Labor Markets • Production Theory • Total Product • Average Product • Marginal Product • Labor Demand • Marginal Revenue Product (MRP) • Value of the Marginal Product (VMP)

  13. THREE STAGES OF SHORT-RUN PRODUCTION Q STAGE II • • STAGE I TP STAGE III • L Q/L APL L L1 L0 L2 MPL

  14. Marginal Revenue Product (MRP) • Marginal Revenue Product of Labor equals the Marginal Revenue times the Marginal Product of Labor • MRPL= MR*MPL • Units of Measure: $/L = ($/Q)*(Q/L)

  15. Value of the Marginal Product (VMP) • The Value of the Marginal Product of Labor equals the output Price times the Marginal Product of Labor • VMPL= P*MPL • Units of Measure: $/L = ($/Q)*(Q/L) • For a competitive firm P=MR, therefore MR*MP=MRP=VMP=P*MP • For a monopolistic firm P>MR, therefore P*MP=VMP>MRP=MR*MP

  16. FACTOR COST • Marginal Factor Cost (MFC) • Average Factor Cost (AFC) • Under a rule of one price (wage), the wage rate, W, equals the average factor cost, AFC • W=AFC

  17. Competitive Input Market/Competitive Output Market Competitive Firm Labor Market $/L $/L SL W=AFC=MFC=MRP=VMP W MRP=VMP DL 0 0 L L* L

  18. Competitive Input Market/Monopolistic Output Market Monopolistic Firm Labor Market $/L $/L SL W=AFC=MFC=MRP<VMP VMPL W DL MRPL 0 0 L L* L

More Related