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  • Hey! How ya doin' econ students? This Mr. Clifford. Welcome to ACDC econ.

  • Right now we're going to talk about perfect competition. Because I know a few things

  • Because I know a few things about being perfect.

  • [Mumbles] stupid

  • Alright before jumping to perfect competition let's take a step back and

  • talk about the four market structures. Every product out there is produced in a market

  • that's one of these for market structures

  • there's perfect competition, monopolistic competition,

  • oligopoly and monopoly.

  • I'm going to explain perfect competition this video

  • but the other market structure: imperfect competition

  • is also super important.

  • A great example of a product that is produced in perfect competition is

  • oranges or strawberries or milk.

  • No, NO, Paul, I'm not drinking another gallon of milk!

  • You'll remember that firms inside perfect competition have several characteristics

  • the most important one is that their products are completely identical

  • as other firms, that means that they're perfect substitutes for each other.

  • Think about,

  • a dairy farmer can't taste milk and determine if that was his cow or some other

  • cow that produced that milk.

  • It's the same way with all other firms are in

  • perfect competition

  • another key characteristic is that there's many small firms and plenty of

  • people producing this product.

  • Now, if you put those together, you find out that these firms

  • are: price takers.

  • This means they have to take price that is set by the market.

  • So, they have no control over the price.

  • It'll make more sense if I show it to you in graphs.

  • What we have right here is the market for milk.

  • You learned this before, it's got demand and supply and it sets an

  • equilibrium at ten dollars.

  • so this is the industry graph, or the market graph, that includes all the different

  • firms that produce milk.

  • Right here is the graph for one individual firm

  • Since their price takers, the demand for this firm is horizontal it is perfectly elastic.

  • This is because they have no control over the

  • price

  • If they raise the price up, to 11, then no one is going to go to them, they will go to all the

  • other dairy farmers

  • and there's no reason for them to lower the price below 10, because people

  • are going to buy as many units they sell, at ten dollars

  • this horizontal demand curve is the demand, but is also equal to marginal revenue

  • The marginal revenue is the additional revenue the firm gets when they sell another unit.

  • So, if they sell another crate for ten dollars, their additional revenue is ten dollars

  • They sell another crate, for another ten dollars, additional revenue is ten dollars.

  • So, the demand equals the marginal revenue. It also equals the average revenue and the price.

  • And your teacher will tell you that this is sometimes called Mr. DARP. (MR=D=AR=P)

  • (Ehhhhhh)

  • That's something I do my classes anytime I say the word MR=D=AR=P

  • the students have to go: Ehhhhhhh

  • This is the horizontal demand curve which equals the marginal revenue curve.

  • Mr. DARP. (ehhhhhh)

  • The point is, the demand and the marginal revenue are horizontal for the firm.

  • Now, if we take some cost curves and put it on here,

  • we can actually figure out how many units this firm should produce

  • and we can calculate profits.

  • Let's zoom in on the fim. Notice, we have a marginal cost curve and an ATC.

  • The first question is to figure out how many units they should produce.

  • That brings up the most important concept in all of microeconomics:

  • Which is the profit maximizing rule. All firms should produce where

  • MR equals MC.

  • This is basically saying that you should always produce as long as the marginal revenue

  • is greater than the marginal cost.

  • At the point where the equal you should stop

  • producing and that is the profit maximizing quantity.

  • if you produce for the marginal cost is greater than marginal revenue, you make

  • less profit than before.

  • This firm is going to produce where MR hits MC, which is right there, at 10 units.

  • they don't wanna stop at four units because they can still produce more profit

  • And they don't want to produce eleven units because

  • the additional cost is greater than the additional revenue of selling that unit.

  • This is why you spent so much time learning about all the cost curves.

  • You put them together with the rescue curves and now you can figure out how many

  • units should a firm produce

  • what is their total revenue, their total cost and how much is profit

  • In this case, they're selling 10 units

  • for ten dollars each. That big box, right there, is total revenue.

  • Now, is that all profit?

  • No, because some of it is cost. To calculate the total cost, you have to find

  • the average total cost of each unit. Which is six dollars.

  • 6 x 10 = 60 That box, in yellow, is the total cost.

  • Total revenue of 100, minus 60 total cost

  • gives you 40 dollars profit, green box

  • This individual firm is maximizing profit we're at MR = MC

  • and they're making economic profit of $40 or four dollars per unit.

  • This graph is a firm in a perfectly competitive industry.

  • and that's graph that you will have to draw

  • and analyze do well on your tests. Make sure you feel comfortable drawing

  • these side by side graphs; the market and the firm.

  • with the firm showing profit or showing a loss

  • or breaking-even in the long-run equilibrium. Another thing you should be able to

  • do other than just draw the graph is

  • use a chart to calculate how much profit is being made.

  • You will learn how to do that in the next video.

  • Hey, I hope this video helped you to understand perfect competition.

  • If you like these videos, make sure to subscribe. Check out the next video that will

  • explain the whole thing over again except using charts. Also, take a look at

  • my microeconomics review video that covers

  • all the concept of microeconomics. It'll get you ready for your final

  • or for your AP tests. Alright, 'till next time.

Hey! How ya doin' econ students? This Mr. Clifford. Welcome to ACDC econ.

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短期內的完全競爭-微觀經濟學3.8 (Perfect Competition in the Short Run- Microeconomics 3.8)

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    Harrison Mia 發佈於 2021 年 01 月 14 日
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