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6: Market Equilibrium and the Perfect Competition Model
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- 6.1: Assumptions of the Perfect Competition Model
- 6.2: Operation of a Perfectly Competitive Market in the Short Run
- 6.3: Perfect Competition in the Long Run
- 6.4: Firm Supply Curves and Market Supply Curves
- 6.5: Market Equilibrium
- 6.6: Shifts in Supply and Demand Curves
- 6.7: Why Perfect Competition Is Desirable
- At the price charged at equilibrium, some buyers are getting a bargain of sorts because they would have been willing to purchase at least some units even if the price had been somewhat higher. The fact that market demand curves are downward sloping rather than perfectly flat reflects willingness of customers to make purchases at higher prices.
- 6.8: Monopolistic Competition
- As an example, consider midsized passenger automobiles. Some firms may sell cars that are a different color or different shape, have different configurations of onboard electronics like GPS systems, and so on. Some firms may make the cars more reliable or built to last longer.
- 6.9: Contestable Market Model
- In the contestable market model, there can be a modest number of sellers, each of which represents a sizeable portion of overall market sales. However, the assumptions of free entry and exit and perfect information need to be retained and play a key role in the theory underlying this model. If buyers in the market know which seller has the lowest price and will promptly transfer their business to the lowest price seller.
- 6.10: Firm Strategies in Highly Competitive Markets