EC 201 10-24-08 - Perf. Comp. Monop. Comp. } both have free...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
EC 201 10-24-08 Monopolistic Competition o Many firms, each small (no mkt. power by size) o Product differentiation (some mkt. power) Ex.: retailing Gasoline station can raise price some and not lose all customers Clothing Location Styling Service “some” or “a little” mkt. power →D downward sloping, but fairly elastic Profit per unit=P-ATC If econ profit >0, P>ATC at Q* Monop. Comp.: free entry + exit, no barriers to entry If positive econ. Profit 1. Entry 2. Prices ↓ until zero econ. Profit → P=ATC Monop. Comp. with zero econ. Profit
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Perf. Comp. Monop. Comp. } both have free entry tendency toward zero econ. Profit Evaluation of monop. Comp. Zero econ. Profit P>MC, but not by much ATC not nec. Min. but close to cost-min. Variety Oligopoly o Few sellers o Strategy +interactions of firms o Often, oligopoly want to collude (cooperate) cartel collusion among oligop. Firms o If cartel succeeds, raise P, P Shared monopoly o Goal: charge monopoly P + divide up monopoly profits o Often, cartel members cheat on agreement...
View Full Document

Page1 / 2

EC 201 10-24-08 - Perf. Comp. Monop. Comp. } both have free...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online