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Micro12 - Chapter 12Monopolistic Competition other...

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Chapter 12 Monopolistic Competition &  Oligopoly Monopolistic Competition:    Many small size firms selling  differentiated  products that are good substitute for each  other. Characteristics of Monopolistic Competition:    Firms compete by selling  differentiated  products.  Free entry and exit.  Limited monopoly power that makes demand   downward  sloping. Short-Run Equilibrium:   By setting MR = MC, firms decide  price and quantity simultaneously to maximize profit.  In the short-run, firms earn profit. 
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Chapter 12 Monopolistic Competition &  Oligopoly Demand Facing a Firm in Perfectly Competitive, Monopoly, and  Monopolistic Competition. Perfect Comp. Monopoly Monopolistic Comp.
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Chapter 12 Monopolistic Competition &  Oligopoly Profit-Maximizing Monopoly 
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Chapter 12 Monopolistic Competition &  Oligopoly Monopolistc Competition, Short-Run Equilibrium
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Chapter 12 Monopolistic Competition &  Oligopoly Perfect Competition, Short-Run Equilibrium
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Chapter 12 Monopolistic Competition &  Oligopoly Perfect Competition, Long-Run Equilibrium Price falls to Min. ATC and firm earns only normal profit
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Chapter 12 Monopolistic Competition &  Oligopoly Monopolistic Competition, Long-Run Equilibrium The Firm Earns normal profit. Efficiency is less than perfect competition because the firm is not operating at Min. ATC point.
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Chapter 12 Monopolistic Competition &  Oligopoly In the Long-run, entry to the market drives the profit  down to P = ATC, and the firm earns  normal profit . To increase their sale and profit over time, firms in  monopolistic competition resort to advertising.    Advertising shifts demand to right. Note that , demand and price do not fall to minimum  average total cost (Min. ATC).  Price is higher than  Min. ATC.
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Chapter 12 Monopolistic Competition &  Oligopoly Efficiency of Monopolistic Competition Firm:   Perfectly competitive market is efficient because it  maximizes consumer and producer surplus by the rule:  MR = P = MU = MC.  In Monopolistic Competition:    MC = MR < P .   The value  to the consumers of the additional units of good is more  than MC.  If MC = P, total surplus could be increased  (the firms would supply more goods to market).  The monopoly power of the monopolistic competition firm  creates  dead weight loss .  Monopolistic competition firm operates with  excess  capacity .  Its output is below Min. ATC.
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Chapter 12 Monopolistic Competition &  Oligopoly  Entry of new firms drives the profit to zero both in  perfect competition and monopolistic competition.   However, for perfect competition, in the long-run,  P =  Min. ATC .   In monopolistic competition  P > Min. ATC That is monopolistics competitive firms operate with 
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