Lecture 22 - Announcements HW due tonight. Practice...

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Announcements HW due tonight. Practice problems for MT2 will be up by Friday. I will post all iClicker questions after Monday’s class. After ch. 10 we will jump to ch. 15 (then back to 11-13). Ch 15. will NOT be on this midterm. Ch. 15 HW will be due on Monday Nov. 3 1 of 38
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Chapter 10 – Monopolistic Competition and Oligopoly
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Monopolistic Competition and Oligopoly Monopolistic Competition and Oligopoly Monopoly and perfect competition are two extreme models. We don’t see either very much in the real world. In the real world we more often see mixtures of the two. We will talk about two different types of these “mixtures”: Monopolistic Competition and Oligopoly. 3 of 38
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4 of 38 MONOPOLISTIC COMPETITION AND OLIGOPOLY 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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5 of 38 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 A monopolistic competitive industry has the following characteristics: 1. a large number of firms 2. no barriers to entry 3. product differentiation. It’s the last characteristic that makes monopolistic competition different from perfect competition. 6 of 38
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Monopolistic Competition While pure monopoly and perfect competition are rare, monopolistic competition is a very common form or organization for firms in the U.S. Take for example the restaurant business. The San Francisco Yellow Pages has 26 pages devoted to listing over 1,500 restaurants in the area. There are a large number of firms. All of the restaurants except for chain restaurants are unique in the product they provide. Thus we have product differentiation. Restaurants start up and close all of the time. There is free entry and exit. 7 of 38
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8 of 38 MONOPOLISTIC COMPETITION Percentage of Value of Shipments Accounted for by the Largest Firms in Selected Industries, 1997 INDUSTRY DESIGNATION MKT. SHARE OF FOUR LARGEST FIRMS MKT. SHARE OF EIGHT LARGEST FIRMS MKT. SHARE OFTWENTY 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.
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Lecture 22 - Announcements HW due tonight. Practice...

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