PPT On Theory Of Firm

Presentation On Theory Of Firm
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Theory Of Firm Presentation Transcript:
1.Theory of firm
Monopolistic competition
Oligopoly

2.Monopolistic Competition
It is a market with many competing firms where each firm has a little bit of market share. Firms have the ability to set their own prices.

3.Assumptions
Each firm produces a product that is differentiated
Consumer and producer have imperfect knowledge of the market.
There is free entry and exit of firms in response to profits in the industry

4.Product Differentiation
Product differentiation is usually achieved in one of three ways:
(1) physical differences- product of one firm is physically different form the product of other firms.
(2) perceived differences- goods are only perceived to be different by the buyers
(3) support services- products that are physically identical and perceived to be identical are differentiated by support services

5.Revenue Curves

6.Short run Profit & Loss

7.Long run Normal Profit

8.Productive and allocative efficiency in Monopolistic Competition-short run

9.Long Run

10.Oligopoly
An oligopoly market exists when barriers to entry result in a few mutually dependent companies controlling a substantial portion of a market.