TradeLecture16

TradeLecture16 - The Theory of Imperfect Competition...

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The Theory of perfect Competition Equilibrium in a Monopolistically Competitive Market Imperfect Competition Cost C , and Price, P CC AC 3 AC 2 E P 2 , P 1 PP P 3 AC 1 Number © Ben Zissimos, Vanderbilt University ub e of firms, n n 3 n 1 n 2
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The Theory of perfect Competition The equilibrium number of firms h d d i P t h t t h Imperfect Competition • The downward-sloping curve PP shows that the more firms, the lower the price each firm will charge. – The more firms, the more competition each firm ,p faces. • The upward-sloping curve CC tells us that the more firms there are, the higher the average cost of each firm. the number of firms increases, each firm will If the number of firms increases, each firm will sell less, so firms will not be able to move as far down their average cost curve. © Ben Zissimos, Vanderbilt University
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Monopolistic Competition and Trade Effects of a Larger Market Cost C , and Price, P CC 1 P 1 1 CC 2 PP P 2 2 Number © Ben Zissimos, Vanderbilt University ub e of firms, n n 1 n 2
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TradeLecture16 - The Theory of Imperfect Competition...

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