Chapter Seven: Pure Competition

Chapter Seven: Pure Competition

7.1 Four Types of Market Structure (03:31)
This clip introduces four basic market structures, including pure competition, monopolistic competition, oligopoly and monopoly.
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7.2 The Characteristics of Purely Competition (03:01)
This clip discusses the basic features of a purely competitive market and explains why it is important to study pure competition.
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7.3 Total Revenue, Average Revenue & Marginal Revenue
This clip defines and distinguishes total revenue, average revenue and marginal revenue.
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7.4 The Demand Curve Facing a Purely Competitive Firm (03:08)
This clip explains why the demand curve facing a price-taking firm is a straight horizontal line at the ongoing market price and why this horizontal demand curve is also the firm’s average revenue and marginal revenue lines.
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7.5 Short-run Profit Maximization for a Purely Competitive Firm (07:34)
This clip provides a numerical and a graphical examples to illustrate how a firm can maximize its short-run profit by producing at a point where marginal revenue equals marginal costs. In this case, the firm’s economic profit is positive and is maximized.
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7.6 Sometimes, Minimizing Loss is the Best a Firm Can Do in the Short Run (04:50)
This clip provides a numerical and a graphical examples to illustrate how a firm can minimize its short-run loss by producing at a point where marginal revenue equals marginal costs. In this case, the firm’s economic profit is negative, but is minimized and is less than its fixed costs.
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7.7 Sometimes, Shutting Down Temporarily is the Best a Firm Can Do in the Short Run (02:52)
This clip provides a numerical and a graphical examples to illustrate how a firm can minimize its short-run loss by shutting down temporarily, rather than producing at marginal revenue equals marginal costs. In this case, the firm’s economic profit is negative, but is minimized and equals its fixed costs.
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7.8 Solving the Three Questions Related to Short-run Profit Maximization (06:39)
This clip explores the three short-run profit-maximization questions: Should the firm produce or shut down? How many units should the firm produce? and How much is the firm's profit? The concepts of shutdown price and breakeven price are introduced, and answers to the three questions are analyzed graphically.
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7.8a Shutdown Point & Breakeven Point (03:35)
This clip expands on clip 7.8 and focuses on the concepts of shutdown price and breakeven price.
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7.9 The Relationship between Marginal Cost Curve and Short-run Supply Curve of a Purely Competitive Firm (04:28)
Using the concepts of shutdown price and breakeven price, this clip shows that a portion of the marginal cost curve of a purely competitive firm is its short-run supply curve.
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7.10 Short-run Equilibrium in a Purely Competitive Market (02:00)
This clip brings together the diagram of market supply and demand and that of individual profit-maximizing firm equating price with marginal costs. The market supply and demand curves determine the equilibrium price which, in turn, guides individual producers in choosing their profit-maximizing output quantities.
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7.11 Long-run Analysis: Assumptions & Results (04:47)
This clip introduces some basic results pertaining to long-run equilibrium in a purely competitive industry. It is pointed out that entry/exit will eliminate economic profits/losses in the long run, where firms will produce at the minimum point of their average total cost curve and product price will equal that minimum ATC.
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7.12 Entry & Exit Ensuring Zero Economic Profit in the Long Run (06:25)
This clip shows graphically how entry will eliminate economic profits and how exit will eliminate economic losses in the long run.
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7.13 Long-run Supply Curve: An Overview (05:28)
This clip introduces the concept of long-run supply curve of a purely competitive industry and shows that the shape of the curve depends on whether the industry is a constant-cost, increasing-cost or decreasing-cost industry.
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7.14 Long-run Supply Curve in a Constant Cost Industry (05:08)
This clip discusses in more detail long-run supply curve of a purely competitive industry with a constant-cost structure.
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7.15 Long-run Supply Curve in an Increasing Cost Industry (05:49)
This clip discusses in more detail long-run supply curve of a purely competitive industry with an increasing-cost structure.
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7.16 Long-run Supply Curve in a Decreasing Cost Industry (04:41)
This clip discusses in more detail long-run supply curve of a purely competitive industry with a decreasing-cost structure.
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7.17 Efficiency in Long-run Equilibrium (08:31)
This clip examines the efficiency aspect of purely competition, including productive efficiency and allocative efficiency. It is shown that in long-run equilibrium each firm produces at the output level that is associated with the triple equality of P = MC = Min ATC. The implications of this triple equality are discussed.
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7.17a Long-run Equilibrium: The Triple Equality (03:27)
This clip expands on clip 7.17 and focuses on the triple equality of P = MC = Min ATC in long-run equilibrium and its implications.
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7.17b  Productive Efficiency in Long-run Equilibrium (01:33)
This clip expands on clip 7.17 and focuses on productive efficiency in long-run equilibrium.
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7.17c Allocative Efficiency in Long-run Equilibrium (04:26)
This clip expands on clip 7.17 and focuses on allocative efficiency in long-run equilibrium.
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7.17d Long-run Equilibrium: Self-Correction Mechanism (01:37)
This clip expands on clip 7.17 and focuses on the self-correction mechanism of a purely competitive market to restore efficiency when disrupted by changes in the economy.
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