Chapter 16: Pure Monopoly There are three types of firms – pure monopoly, monopolistic competition, and oligopoly which are usually lumped into a setting that can best be described as imperfect competition. Imperfectly competitive firm is one that can exercise some control over the price it receives for its product for two reasons; 1) each firm produces a sizable share of the market and 2) each firm sells a product that is distinguishable from competitors’ products. Take for example, US Steel – If US steel reduced its annual output by 10-20 percent, there would be a noticeable decline in total steel output in the United States and an increase in the price of steel. Also, firms that have a product which differs for any reason within the market can also exercise some control over the market. The demand curve facing a perfectly competitive firm is perfectly elastic whereas for the imperfectly competitive firm, the demand is downward sloping. However, the demand curve for a imperfectly competitive firm is considerably more elastic than the market demand
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This note was uploaded on 07/14/2008 for the course ECON 73100 taught by Professor Klepper during the Fall '07 term at Carnegie Mellon.