EXAM #3 ECON CHEEAT SHEET pg1.docx - Lots of firms but differentiated products good substitutes each firm faces downward sloping the long run result is

Lots of firms but differentiated products, good substitutes, each firm faces downward sloping Chapter 19: Public Goods Chapter 17: Monopolistic competition and advertising However, the variety provided may be enough to make up for the small efficiency loss. the long run result is zero economic profit. It is important to note, though, that these zero profits in the long run refer to the theoretical “representative firm” in the market. In the real world, economic profits can exist in the long run if firms can develop a high enough degree of product differentiation from their competitors

Unformatted text preview: MCM is demand curve is more elastic than monopoly because high number of substitutes but not perfectly elastic like perfect competition. Exactly how elastic the demand curve will be depends on the number of rivals as well as how effectively the firm can differentiate its product. MR=MC Compensating differential is the difference in wages that offsets difference in working conditions The Law of Diminishing Return s is the concept that, after some point, each individual worker that is hired will add less value than the one hired previously. Chapter 18: Labor Markets...
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