CompetitivealwaysareAllocativelyEfficient EfficiencyP min of ACfailasATC Competitiveachieve EfficiencyPareto Consumer Surplus PP0QQProducer Surplus DS because of the operation of The difference be ID: 518487
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‡”ˆ‡…– …‘’‡–‹–‹‘ǡ ‘‘’‘Ž›ƒ† ™‡Žˆƒ”‡EfficiencyP = MCfailas CompetitivealwaysareAllocativelyEfficient EfficiencyP = min. of ACfailasATC Competitiveachieve EfficiencyPareto Consumer Surplus PP0QQProducer Surplus DS because of the operation of The difference between what the marginal cost of supplying that MC = AC Resource cost under perfectcompetition. MC = AC Note how the slope of the Marginal Revenue curve horizontal axis, (i.e 0,MR =MR,D) MC = AC profit under monopoly. ‘‘’‘Ž›ǣ ŽŽ‘…ƒ–‹˜‡ ˆˆ‹…‹‡…› marginal benefit:value to buyers) Marginal cost Value to buyers is greater than cost to seller. Value to buyers is less than cost to seller. Cost Value Efficient Welfare is ‘‘’‘Ž›ǣ ’”‘†—…–‹˜‡‹‡ˆˆ‹…‹‡…› Quantity Q Q Costs andRevenue Demand Average total cost Average total cost Marginal revenue Marginal revenue Marginalcost MarginalcostMarginalcost Monopolyprice Monopolyprice B A A �P MCP� min of ATC ‘‘’‘Ž›ǣ ’”‘†—…–‹˜‡‹‡ˆˆ‹…‹‡…›ȋ…‘–ǯ†Ȍwelfareproductiveinefficiency,costs.ManagerialagentinefficiencyDarwinian”‹…‹’ƒŽǦƒ‰‡– ‘†‡Ž Peitz,IndustrialOrganization:MarketsStrategiesCambridgeUniversityPress, ‘‘’‘Ž›ǣ †›ƒ‹…‡ˆˆ‹…‹‡…›ȋǫȌHowever:competitionstimulatesinnovation,antebutitcannotcompletelyappropriatebenefitsinnovation(postBertrandcase:innovativeܯܥൌܿܽ݊݀ ȫwithoutpatentprotectionallthecompetitorsmayproducesamelevelofcosts.Thereforeܲൌܿ ܽ݊݀ ȫfirmhasanincentiveinnovate.Marketpowerhasanimportantroleinincentivatingfirmstoinnovate,introducenewgoodsandimprovequality. ‘–‡•–ƒ„Ž‡ƒ”‡–•ContestablemarketPanzar,Willig(1982))powerlikelytemporaryexistenceprofitwouldattractentrynewerodemarketpower. Incumbentmonopolist,potentialentrantHomogeneousproductTechnologyൌܨܿݍ ܿ൏ܲ entry