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Chapter 17 Lecture Outline - Economics 101H Vandan Desai...

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Economics 101H Vandan Desai Chapter 17: Monopolistic Competition (Lecture Outline) -------------------------------------------------------------------------------------------------------------------------- Imperfect competition —refers to those market structures that fall between perfect competition and pure monopoly Types of Imperfectly Competitive Markets o Monopolistic Competition many firms selling products similar , but not identical o Oligopoly —only a few sellers, each offering a similar or identical product to others Monopolistic Competition —markets that have some feature of competition and some features of monopoly o Many sellers square4 There are many firms competition for the same group of customers square4 Product examples include: books, CDs, movies, computer games, restaurants, piano lessons, cookies, furniture, etc o Product differentiation square4 Each firm produces a product that is at least slightly different from those of other firms square4 Rather than being a price taker, each firm faces a downward-sloping demand curve o Free entry and exit square4 Firms can enter or exit the market without restriction square4 The number of firms in the market adjusts until economic profits are zero I. Competition with Differentiated Products A. The Monopolistically Competitive Firm in the Short Run i. Short-run economic profits encourage new firms to enter the market . This: Increases the number of products offered Reduces
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