chap12 - Chapter 12 Oligopoly and Monopolistic Competition...

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    Chapter 12: Oligopoly and  Monopolistic Competition
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    Characteristics of a monopolistically  competitive market Many buyers and sellers Differentiated products Easy entry and exit
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    Relationship to other market  models Monopolistic competition is similar to perfect  competition in that: There are many buyers and sellers There are no barriers to entry or exit Monopolistic competition is similar to  monopoly in that: Each firm is the sole producer of a particular  product (although there are close substitutes) The firm faces a downward sloping demand curve  for its product
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    Demand curve facing a  monopolistically competitive firm
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    The firm’s demand curve and  entry and exit As firms enter a  monopolistically  competitive  market, the  demand facing a  typical firm  declines and  becomes more  elastic.
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    Short-run equilibrium in a  monopolistically competitive industry Economic profits  lead to entry and  a reduction in the  demand facing a  typical firm.
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    Long-run equilibrium in a  monopolistically competitive industry Entry 
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