Influence of production price and cost changes on marginal profit

1. Market structure and its characteristics Market structure refers to the market state reflecting different degrees of competition, including perfect competition market structure, complete monopoly market structure, monopolistic competition market structure and oligopoly market structure. The characteristics of market structure: first, the number of transactions; Second, whether the quality of the traded goods is the same; Third, whether there are obstacles to entering the market; Fourth, the extent to which manufacturers control market prices. 2. The meaning and conditions of perfect competition refer to the market structure in which competition is not hindered or interfered by any means. Conditions: First, there are countless buyers and producers in the market; Second, there is no difference between products on the market; Third, manufacturers and production factors can flow freely; Buyers and manufacturers complete market information. 3. The demand curve and income curve under the condition of perfect competition. Because in a perfectly competitive market, the manufacturer is the receiver of the price, and he cannot change the price. The demand curve, that is, the price line is horizontal, and the demand curve is also the average income line and marginal income line. P=AR=MR=d But the demand curve mentioned here refers to the demand curve of a single enterprise. Not the demand curve of the whole industry. 4. Under the condition of perfect competition, the short-term equilibrium of manufacturers is short-term. In a perfectly competitive market, product prices and production scale are fixed, and manufacturers cannot adjust all production factors according to market demand. Therefore, from the perspective of the whole industry, it may be that supply is less than demand (profit), or it may be that supply exceeds demand (loss). The marginal income curve and the average income curve intersect at the lowest point of the average income curve, and the output at this point is the maximum profit output or. SAC), there is excess profit at this time, so the price line must be above the lowest point of the short-term average cost curve. According to the principle of profit maximization: MR=MC, at this time, the total income TR = Po QO = Pooqoe, the total cost TC = P 1 QO = P 1OQOF excess profit = TR-TC = P0P6. 0 or P & gtSAC in the second case: supply equals demand, that is, price equals average cost (P=SAC). At this time, there is normal profit and excess profit is zero. This point is called the break-even point. Because of the balance between supply and demand, the price line must be tangent to the lowest point of the average cost curve. According to the principle of profit maximization: MR=MC, total income TR = PO QO = POQoE, total cost TC = po qo = pooqoe excess profit =TR-TC=O or P=SAC. In the third case, supply exceeds demand, that is, the price level is low (p Because supply exceeds demand, the price line must be lower than the lowest point of the average cost curve. According to the principle of profit maximization: MR=MC, total income TR = po qo, total cost TC = 0 or PSAVC), there is a loss at this time, but the fifth situation is still production: in the case of loss, but the price is equal to the average variable cost (P=SAVC), that is, the price line is tangent to the lowest point of the average variable cost, and this point E is called the stop point. At this time, it is the same for him whether the manufacturer produces or not, that is, the production income is only enough to make up for all variable costs. But for manufacturers, production is better than no production, because manufacturers can put into production immediately. Therefore, in the short term, the condition for manufacturers to continue production is P≥SAVC. The sixth case: in the case of loss, but the price is less than the average variable cost (p To sum up, in a perfectly competitive market, the condition for short-term equilibrium of manufacturers is: MR=MC5. The long-term equilibrium condition of perfectly competitive manufacturers is that in the short term, perfectly competitive manufacturers can achieve equilibrium, but they cannot adjust their production scale. As mentioned above, the manufacturer may lose money in the short-term equilibrium. But in the long run, all factors of production are variable, so manufacturers can eliminate losses by adjusting their own scale or changing the number of manufacturers in the industry, or carve up excess profits, and finally make excess profits zero and reach a new equilibrium, that is, long-term equilibrium. The specific process is as follows: if the supply is less than the demand and the price level is high, that is, when there is excess profit, each manufacturer will expand the production scale or new manufacturers will join the industry, thus increasing the supply of the whole industry, lowering the market price, lowering the demand curve of individual manufacturers and reducing the excess profit until the excess profit disappears. If the supply exceeds demand and the price level is low, that is, when there is a loss, the manufacturer may reduce the production scale or the branch chamber of commerce in the industry will quit, thus reducing the supply of the whole industry, lowering the market price and moving up the demand curve of a single manufacturer. Until the loss disappears. Supply equals demand, achieving long-term equilibrium. In the long run, because manufacturers can freely enter or exit a certain industry and adjust their production scale, the situation that supply is less than demand and supply exceeds demand will automatically disappear, and the final price level will reach a state where each manufacturer has neither excess profit nor loss. At this time, the supply and demand of the whole industry are balanced, and the output of each manufacturer is no longer adjusted. So as to achieve long-term equilibrium. The condition of long-term equilibrium is: MR=AR=MC=AC, which can also be written as: MR=AR=LMC=LAC=SMC=SAC. The characteristics of the long-term equilibrium state of a perfectly competitive market are as follows: first, the manufacturers who survive when the industry reaches a long-term equilibrium have the highest economic efficiency and the lowest cost; Second, manufacturers who survive when the industry reaches a long-term equilibrium can only get normal profits. If there are excess profits, it will attract new manufacturers, thus expanding the supply of the whole market and reducing the market price to the point where each manufacturer can only get normal profits. Third, when the industry reaches a long-term equilibrium, the output provided by each manufacturer must be the lowest point of its short-term average cost curve as well as its long-term average cost curve. 6. To evaluate the enterprise behavior pattern under the condition of perfect competition, we should pay attention to two points when understanding long-term equilibrium: First, the point of long-term equilibrium is the breakeven point (P=AC). At this time, the cost and benefit are equal. What manufacturers can get can only be the reward of entrepreneurs as one of the factors of production-normal profits. As one of the costs of production factors, normal profit is cost. Break-even point includes normal profit. Therefore, as long as normal profits are obtained, profits are maximized. Second, when the long-term equilibrium is achieved, the average cost is equal to the marginal cost (MC=AC), which means that under the condition of perfect competition, the cost can be minimized or the economic efficiency can be the highest, that is, from the social point of view, the resource allocation among various products is optimal. The market mechanism of perfect competition, like an invisible hand, can realize the optimal allocation of social resources. 7. The meaning, characteristics and reasons of complete monopoly refer to the market structure in which there is only one producer in the whole industry. There is no substitute for the products produced by the manufacturer, that is, the cross elasticity of product demand is zero, so that the manufacturer will not be threatened by any competitors; It is almost impossible for other manufacturers to enter this industry. Under these conditions, a complete monopolist will have no competitors and there will be no competitive factors in the market, so manufacturers can control and manipulate market prices. The reason for the existence is that exclusive manufacturers control the supply of all resources or key resources for producing a certain product. The exclusive manufacturer has the patent right to produce a certain product. Government concessions, such as railway transportation, water supply, power supply and other departments, are often granted by the government to a manufacturer to monopolize natural monopoly, which refers to those industries that need to show economies of scale in production or have obvious characteristics of increasing returns to scale in the case of huge output. 8. Under the condition of complete monopoly, the demand curve and income curve of manufacturers are in a complete monopoly market. Since there is only one manufacturer in the market, the demand of monopolist's products is the demand of the whole market for products. The demand curve faced by a monopolist is the demand curve of the whole market. A completely monopolized manufacturer is the decider of the market price, and it can decide the price by changing the sales volume. Therefore, the demand curve faced by a complete monopoly manufacturer is a demand curve inclined to the lower right, which shows that a complete monopoly manufacturer must lower its selling price if it wants to increase its sales volume, and the manufacturer can only choose between high price and low price and high sales volume. After the completely monopolized manufacturer determines the product price, the price paid by the buyer is also the average income of the manufacturer in selling unit products. Therefore, the average income of manufacturers also decreases with the increase of product sales, and the average income curve AR overlaps with the demand curve D faced by manufacturers. At the same time, the manufacturer's marginal income from each additional unit of product sales, MR, is also decreasing, which is less than AR under each sales volume. So the marginal income curve is at the lower left of the average income curve. 9. Short-term equilibrium and long-term equilibrium of manufacturers under the condition of complete monopoly. Compared with the long-term equilibrium and complete competition in a completely monopolized market, the short-term equilibrium is the same in words, but the difference is the change in graphics. Because in a completely monopolized market, the demand curve is a line inclined to the lower right, while in a completely competitive market, the demand curve is a horizontal line. The specific process is as follows: short-term equilibrium of manufacturers: in a completely monopolized market, manufacturers can maximize profits by controlling output and price, but manufacturers in a completely monopolized position cannot do whatever they want, which is limited by market demand. In a completely monopolized market, manufacturers still have to follow the principle of profit maximization (marginal revenue equals marginal cost) to determine their optimal output. After this output is determined, it is difficult to fully adapt to the market demand in the short term. In this way, supply may be less than demand (profit) or supply exceeds demand (loss). We should pay attention to the following points: the demand curve, that is, the price line, is inclined to the lower right, because the manufacturer is the price decider in a completely monopolized market, and he may change the price; Marginal income is less than average income; The marginal income curve intersects with the lowest point e of the average income curve, and the output at this point is the maximum profit output or the minimum loss output. In the first case, the supply is less than the demand, that is, the price level is high (the price line is above the average cost curve), and there is excess profit (Figure A). According to the principle of profit maximization, the price and output are optimal when MR=MC, and the price and output at this time are PO and QO respectively. When drawing, pay attention to lead the line to the horizontal axis (quantity axis) from the intersection point where marginal revenue equals marginal cost, which is the optimal output, and then lead the line to the demand curve at point F and then to the vertical axis (price axis), which is the optimal price. According to the principle of profit maximization: MR=MC, at this time, the total income tr = po QO = pooqof, the total cost TC = Hqo = Hoqo excess profit TR-TC = P0HGF (shaded in Figure A) (a)(b) In the second case, the supply equals the demand, that is, the price equals the average cost (the price line is tangent to the average cost line), and there is normal profit at this time. The excess profit is zero, which is called the break-even point according to the principle of profit maximization (Figure B): total cost TC = po qo = pooqoe excess profit = TR-TC = O. In the third case, supply exceeds demand, that is, the price level is low (P price line is below the average cost curve), and there is a loss at this time, and the excess profit is negative (Figure C). According to the principle of profit maximization: MR=MC, total income TR = po qo = p0qoe, total cost TC = Hqo = Hoqo excess profit =TR-TC=-HPOFG (shaded in Figure C), whether the enterprise produces at this time depends on the average variable cost. As long as the average variable cost is below the price line, it is still produced despite the loss, because at this time, the manufacturer can recover all the variable costs and part of the fixed costs, and the loss of production is less than that of no production. The fourth situation: yes. But as long as the price is greater than or equal to the average cost, the enterprise will still produce, and the tangent point f between the price line and the average variable cost is called the stopping point. At this time, it is the same for him whether the manufacturer produces or not, that is, the production income is only enough to make up for all variable costs. But for manufacturers, production is better than no production, because once the situation improves, manufacturers can immediately put into production. (Figure C) So in the short term, the condition for the manufacturer to continue production is P≥AVC. (c)(d) The fifth case: in the case of loss, but the price is less than the average variable cost (that is, the price line is below the average variable cost line), at this time, the manufacturer can only recover part of the variable cost, and the loss of production is greater than the loss of non-production, so it is necessary to stop production. To sum up, in a completely monopolized market, the short-term equilibrium conditions of manufacturers are: MR=MC, and the long-term equilibrium conditions: although perfectly competitive manufacturers can achieve equilibrium, they may lose money in the short-term equilibrium because they cannot adjust the production scale, as mentioned above. However, in the long run, a completely monopolized manufacturer can adjust all production factors, change the scale of production, and obtain economies of scale from the aspects of technology and management, so the manufacturer will always earn excess profits by himself. In the long run, it is impossible for other manufacturers to join the completely monopolized industry. The excess profits of manufacturers can and should be maintained for a long time. If the total income of a completely monopolized manufacturer cannot make up for its economic costs in the long-term operation, then unless the government gives long-term subsidies, it will inevitably quit the industry. The long-term equilibrium characteristic of completely monopolized industries is that they have excess profits. As shown in the figure, the long-term marginal cost curve LMC and marginal revenue curve MR of the monopolized manufacturer intersect at point E. At this time, according to the principle of profit maximization, the manufacturer has reached a long-term equilibrium, the equilibrium output is Q0, the equilibrium price is P0, and the excess profit obtained by the manufacturer is the shaded part in the figure. The condition of long-term equilibrium is: MR=LMC=SMC 10. The difference between the long-term equilibrium of perfectly competitive manufacturers and the long-term equilibrium of monopoly manufacturers is the first. The conditions of long-term equilibrium are different. The long-term equilibrium condition of perfectly competitive manufacturers is: P=MR=SMC=LMC=LAC=SAC. The long-term equilibrium condition of monopoly manufacturers is: MR=LMC=SMC. Second, the positions of long-term equilibrium points are different. The long-term equilibrium of perfectly competitive firms occurs at the lowest point of the long-term average cost curve. However, the long-term equilibrium of a completely monopolized enterprise cannot be generated at the lowest point of the long-term average cost curve. Third, the profits are different. A perfectly competitive enterprise can only obtain normal profits in a long-term equilibrium. However, monopoly competitors can get excessive monopoly profits because other manufacturers can't enter the industry. 1 1. Price discrimination of a completely monopolized manufacturer, or differential pricing, that is, the monopolist charges different prices for different consumers of the same product at the same time. The conditions of price discrimination are: first, the seller is a monopolist and can manipulate the price; Second, the seller understands the price elasticity of different consumers' demand for the goods they sell; Third, sellers can divide the market with different flexibility, so that consumers in low-priced markets cannot sell goods bought at low prices in high-priced markets, otherwise price discrimination cannot be implemented. Category: First-class price discrimination, also known as complete price discrimination, means that manufacturers determine the price of unit goods according to the highest price consumers are willing to pay. Second-degree price discrimination means that manufacturers charge different prices according to different purchases of consumers. The smaller the purchase volume, the higher the manufacturer's charge, and the larger the purchase volume, the lower the manufacturer's charge. Third-level price discrimination means that manufacturers charge different prices for the same commodity in different consumer groups and different markets. 12. The meaning and conditions of monopolistic competition refers to the fact that many manufacturers produce and sell similar products with differences. There are both competitive factors and monopoly factors in the market. It has the characteristics of complete competition and complete monopoly. Condition: 1. There are many manufacturers and buyers in the market, and the production scale of each manufacturer is relatively small. 2. The products produced by manufacturers in the industry are different, and these products have good substitutability. 3. There are fewer barriers to entering the market. Manufacturers and factors of production are free to enter and leave the market. Comparing the conditions of monopoly competitive market and perfect competitive market, it is found that the market structure of the two markets is relatively close, and the fundamental difference lies in the difference of products. Product difference is the decisive reason for the coexistence of monopoly factors and competitive factors in a monopolistic competitive market. 13. The demand curve of monopolistic competition The demand curve faced by manufacturers in monopolistic competition market is not as level as that of perfectly competitive manufacturers. It is not as steep as a complete monopoly manufacturer, but a relatively gentle curve inclined to the lower right. The characteristics of monopolistic competitive market structure make each manufacturer face two demand curves, as shown in Figure 5- 10. One is the demand curve D expected by the manufacturer. The other is the actual demand curve of the manufacturer D. Figure 5- 10 demand curve of monopoly competitors 14. The condition of short-term equilibrium of monopoly competitors is: MR=SMCd=D At this time, the manufacturer may have excess profits. Loss or only normal profit. The long-term equilibrium condition of monopoly competitors is: Mr = LMC = Smcar = Lac = SACD = D15. The meaning and conditions of oligopoly refer to the market structure in which a few manufacturers control the production and sales of the whole market. Generally, the concentration rate is used as the standard to measure the degree of oligopoly, and the concentration rate refers to the sales of a certain number of manufacturers (such as four). Ratio of number of employees, assets, etc. For the whole industry, the greater the concentration rate, the higher the degree of monopoly. Condition: 1. The number of manufacturers in the industry is small. 2. The products produced by manufacturers can be undifferentiated or differentiated. There are great obstacles to enter the oligopoly market. 16. Cournot model was first founded by French economist Cournot. The manufacturer's production cost is zero, and the maximum profit can only be obtained if the maximum profit is obtained; The two manufacturers face the same linear demand curve and adopt the same market price; Every manufacturer thinks that the output of its competitors will not change. Under this assumption, the equilibrium output of A and B is equal to 65438+ 0/3 of the maximum market demand, and the total output of the two manufacturers is equal to 2/3 of the maximum market demand. If there are n manufacturers in this industry, the equilibrium output of each manufacturer is 1/n+ 1 of the maximum market demand. The total output is n/n+ 1 17. Sweezy model was put forward by American economist Sweezy to explain the phenomenon of relatively stable price in oligopoly market. The assumption of Sweezy model is: because oligopolistic manufacturers will realize the interdependence, when an oligopolistic manufacturer raises the price, its competitors will not raise the price to maintain market share; However, when oligopoly manufacturers reduce their prices, their competitors also reduce their prices to avoid the decrease of market share, thus forming a characteristic demand curve-bending demand curve (demand curve of a breakthrough point), as shown in the figure, point E is the bending point. Because the demand curve has a bending point, the corresponding marginal revenue curve becomes two discontinuous segments: MR 1, MR2. Then when the marginal cost curve MC is located at any position between two points of FG, the output and price corresponding to the profit maximization of the manufacturer remain unchanged. That is to say, when the cost changes within a certain range, the output and price of the manufacturer are relatively stable, and the total income (product of price and output) remains unchanged. When the cost is reduced (from MC 1 to MC3) and the income is unchanged, the profit (the difference between the total income and the total cost) will increase.