micro 9&10


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DIFFERENCE BETWEEN MONOPOLISTIC COMPETITION AND PUR COMP: firms within monopolistic competition might produce differentiated products and entry barriers (licenses, permits, etc. ..) might be present for potential producers. Monopolistic competition can give firms market power, or the ability to increase the price of their products Firms within monopolistic competition are said to be price searchers because of the ability to influence the prices of their products. MONOPOLISTIC COMP = more common because In the market, it is extremely rare for firms to produce goods and services which are perfect substitutes for the goods and services of their competition. Examples of monopolistic competition could include the fast food industry and the retail clothing industry. 1. How is monopolistic competition different from pure competition competition? Monopolistic competition differs from pure competition in a few areas. First, potential producers trying to enter a firm within monopolistic competition, may have to deal with entry barriers. Firms within monopolistic competition generally have the ability to influence the prices of the produces they produce, and are therefore considered price searchers. These firms also have the ability to control market by being able to tweak the price of their products. Whereas firms within monopolistic competition produce differentiated goods, firms within pure competition are independent sellers producing standardized products. There are no entry barriers, firms are able to enter and exit as they please. Also different from firms within monopolistic competition, firms within pure competition are price takers instead of price makers. Monopolistic firms are more common and can include, as were in the notes, fast food and the retail industry. Another example could be health spas. Health spas or beauty stores, they all have similar products but they are differentiated. In order to provide a health service, as well as to produce a beauty product you need permits and licenses (firms must past entry barriers). Both have the ability to increase their prices as they see fit. Firm with the beauty/ health industry have the ability to influence and change their markets by having power over their prices. 2. Give a real-life example of an monopolistic competition industry. Explain your answer. User Anita Stone Submitted 7/13/10 9:10 PM Name Chapter 10 Quiz Status Completed Score 11 out of 15 points Time Elapsed 0 hours, 23 minutes, and 33 seconds out of 0 hours and 30 minutes allowed. Instructions
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Question 1 text Question 1 1 out of 1 points Correct In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic profits because Question 1 answers Selected Answer: Correct competition will force prices down to the level of per-unit production costs. Correct Answer:
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