Student Guide

ECO/561 Version 9

Week Three Student Guide

This weeks topics include how supply and demand, revenue, profit maximization, and the various
cost concepts apply to different market structures. When introducing the market structures, the
readings and discussions illustrate why different firms might utilize different techniques to
increase businessthat is, which business types would utilize pricing strategies and nonprice
strategies to meet goals, which businesses need to consider advertising and what type of
advertising, and which businesses may need to consider cost-reduction strategies to improve
profitability.

Market Structure
OBJECTIVE: Determine pricing strategy to meet organizational goals.
Resource: Ch. 911 of Economics
Content

Ch. 9: Pure Competition

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Ch. 10: Pure Monopoly

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Four Market Models

Pure Competition: Characteristics and Occurrence
Demand as Seen by a Purely Competitive Seller
Profit Maximization in the Short Run: Total-RevenueTotal-Cost Approach
Profit Maximization in the Short Run: Marginal-RevenueMarginal-Cost Approach
Marginal Cost and Short-Run Supply
Profit Maximization in the Long Run
Pure Competition and Efficiency

An Introduction to Pure Monopoly

Barriers to Entry
Monopoly Demand
Output and Price Determination
Economic Effects of Monopoly
Price Discrimination
Regulated Monopoly

Ch. 11: Monopolistic Competition and Oligopoly

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Monopolistic Competition
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Product Variety
Oligopoly
Oligopoly Behavior: A Game-Theory Overview
Three Oligopoly Models
Oligopoly and Advertising
Oligopoly and Efficiency

Student Guide
ECO/561 Version 9
OBJECTIVE: Determine ways to create nonprice barriers to entry based on market structure.
Resource: Ch. 10 of Economics
Content

Ch. 10: Pure Monopoly

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An Introduction to Pure Monopoly

Barriers to Entry
Monopoly Demand
Output and Price Determination
Economic Effects of Monopoly
Price Discrimination
Regulated Monopoly

OBJECTIVE: Determine ways to increase product differentiation based on market structure.

Resource: Ch. 11 of Economics
Content

Ch. 11: Monopolistic Competition and Oligopoly

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Monopolistic Competition
Price and Output in Monopolistic Competition
Monopolistic Competition and Efficiency
Product Variety
Oligopoly
Oligopoly Behavior: A Game-Theory Overview
Three Oligopoly Models
Oligopoly and Advertising
Oligopoly and Efficiency

OBJECTIVE: Determine ways to reduce costs for an organization.

Resource: Ch. 10, 11, & 11W of Economics
Content

Ch. 10: Pure Monopoly

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An Introduction to Pure Monopoly

Barriers to Entry
Monopoly Demand
Output and Price Determination
Economic Effects of Monopoly
Price Discrimination
Regulated Monopoly

Ch. 11: Monopolistic Competition and Oligopoly

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Monopolistic Competition

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ECO/561 Version 9
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Price and Output in Monopolistic Competition

Monopolistic Competition and Efficiency
Product Variety
Oligopoly
Oligopoly Behavior: A Game-Theory Overview
Three Oligopoly Models
Oligopoly and Advertising
Oligopoly and Efficiency

Ch. 11W: Technology, R&D, and Efficiency

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Invention, Innovation, and Diffusion

Role of Entrepreneurs and Other Innovators
A Firms Optimal Amount of R&D
Increased Profit via Innovation
Imitation and R&D Incentives
Role of Market Structure
Technological Advance and Efficiency

Note. The information above is intended to help you complete your assignments. Read chapters
in their entirety, as indicated in the syllabus. Additional information from sections not outlined
above may be needed for classroom discussions.