Managerial Economics and Strategy, 2/e

8 Competitive Firms and Markets

The love of money is the root of all virtue.

—George Bernard Shaw

Learning Objectives

1. List the characteristics of perfect competition.

2. Graphically identify the competitive equilibrium and derive the short-run supply curve.

3. Contrast the short-run and long-run competitive equilibria and supply curves.

4. Use consumer and producer surplus to show the main advantage of perfect competition.

Managerial Problem The Rising Cost of Keeping On Truckin’

To plan properly, managers need to be able to predict the impact of new government regulations on their firms’ costs, their sales, and their probability of surviving. Managers complain constantly about the costs and red tape that government regulations impose on them. The ...