Lecture_Microeconomics_Chapter14

Lecture_Microeconomics_Chapter14 - Monopolistic Competition...

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14 Monopolistic Competition and Oligopoly
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MONOPOLISTIC COMPETITION AND OLIGOPOLY FIGURE 14.1 Characteristics of Different Market Organizations Although not every industry fits neatly into one of these categories, the categories do provide a useful and convenient framework for thinking about industry structure and behavior.
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MONOPOLISTIC COMPETITION monopolistic competition A common form of industry (market) structure in the United States, characterized by a large number of firms, none of which can influence market price by virtue of size alone. Some degree of market power is achieved by firms producing differentiated products. New firms can enter and established firms can exit such an industry with ease.
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MONOPOLISTIC COMPETITION TABLE 14.1 Percentage of Value of Shipments Accounted for by the Largest Firms in Selected Industries, 1997 INDUSTRY DESIGNATION FOUR LARGEST FIRMS EIGHT LARGEST FIRMS TWENTY LARGEST FIRMS NUMBER OF FIRMS Travel trailers and campers 26 36 50 761 Dolls 31 51 66 239 Wood office furniture 34 42 55 639 Book printing 32 45 59 890 Curtains and draperies 26.5 36.3 50.1 2012 Fresh or frozen seafood 13.6 22.9 42.2 586 Women’s dresses 14.2 23.7 39.4 747 Miscellaneous plastic products 5 8 14 7522 Source: U.S. Department of Commerce, Bureau of the Census, 1997 Census of Manufacturers, Concentration Ratios in Manufacturing . Subject Series EC92m315, June, 2001. Firms in a monopolistically competitive industry are small relative to the total market. New firms can enter the industry in pursuit of profit, and relatively good substitutes for the firms’ products are available. Firms in monopolistically competitive industries try to achieve a degree of market power by differentiating their products—by producing something new, different, or better, or by creating a unique identity in the minds of consumers.
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MONOPOLISTIC COMPETITION PRODUCT DIFFERENTIATION, ADVERTISING, AND SOCIAL WELFARE product differentiation A strategy that firms use to achieve market power. Accomplished by producing products that have distinct positive identities in consumers’ minds.
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MONOPOLISTIC COMPETITION TABLE 14.2 Total Advertising Expenditures in 2003 DOLLARS (BILLIONS) Newspapers 45.4 Television 62.2 Direct mail 49.1 Yellow pages 13.9 Internet 5.6 Radio 19.5 Magazines 11.8 Source: McCann Erickson, Inc., Reported in U.S. Bureau of the Census, Statistical Abstract of the United States , 2002, Table 1253.
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MONOPOLISTIC COMPETITION TABLE 14.3 Magazine Advertising Revenues by Category, 2003 DOLLARS (MILLIONS) Automotive 2,088 Technology Telecommunications Computers and software 243 729 Home furnishings and supplies 1,554 Toiletries and cosmetics 1,699 Apparel and accessories 1,513 Financial, insurance and real estate 896 Food and food products 1,391 Drugs and remedies 1,663 Retail stores 986 Beer wine and liquor 394
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MONOPOLISTIC COMPETITION Restaurants and rock bands are good examples of monopolistic competitors that face intense competition. The advocates of spirited competition believe that differentiated products and advertising
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Lecture_Microeconomics_Chapter14 - Monopolistic Competition...

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