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Market Structure (Cost)
See also: Samuelson/Nordhaus: Economics, 18th ed., p. 171
1
Assumptions
11
Market demand = 100
12
Average cost curve of a firm
è U-shaped
Average cost (AC)
Price (P)
AC
Demand (D)
Quantity (Q)
100
2
Q
Efficient scale
Average cost, demand and market structure
21 Efficient scale of a firm è only a small
part of the market demand
AC of a firm, P
Market structure
Competition
D
AC
2
100
(many firms selling altogether the
quantity 'market demand' of 100)
Q
22 Efficient scale of a firm è a substantial
part of the market demand
AC of a firm, P
Market structure
Oligopoly
AC
D
30
100
(few firms selling altogether the
quantity 'market demand' of 100)
Q
21 Efficient scale of a firm è the whole
market demand
AC, P
Monopoly
D
100
MARKSTR.DOC
Market structure
AC
(one firm selling the quantity 'market
demand' of 100)
Q
3rd March 2011
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