MonopolisticCompetition

MonopolisticCompetition - MonopolisticCompetition Chapter...

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Click to edit Master subtitle style 11 Monopolistic Competition Chapter 14
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Course Outline {93B6C7DD-B656-4597-8DAF-0C35C7E5FCD7} Microeconomics troduction is Economics? Markets Work nd and supply tional Topics holds’ Choice Elasticity ncy and Equity t Actions in Markets s and Markets y and Demand references, and Choices onomic Problem put and Costs ct Competition onopoly istic Competition Oligopoly 22
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Lecture Outline I. What is Monopolistic Competition? II. Optimal output/price decision in monopolistic competition III. Comparison with perfect competition IV. Is monopolistic competition efficient? V. Advertising 33
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I. What is monopolistic competition? n Examples: q Women’s and girl’s clothing (2927) q Men’s and boy’s clothing (1362) q Computers(1870) q Jewelry (2278) q Audio and video equipment (521) q Frozen foods(531) q Book printing (690) 44
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55 I. What is monopolistic competition? Features of Monopolistic Competition q Many sellers: n Each firm is sensitive to the average market price, but no firm pays attention to the actions of the other, and no one firm’s actions directly affect the actions of other firms. n Collusion, or conspiring to fix prices, is impossible. q Product Differentiation: n Each firm produces slightly different product, thus facing a downward-sloping demand curve. q Free entry and exit: n Each firm earns zero economic profit in the long run.
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66 II. Output/Price in Monopolistic  Competition n Short-Run Economic Profit q A firm (that has decided the quality of its product and its marketing program) produces the profit maximizing quantity at which its marginal revenue equals its marginal cost (
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This note was uploaded on 06/16/2011 for the course ECON 110 taught by Professor Tan during the Spring '07 term at HKUST.

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MonopolisticCompetition - MonopolisticCompetition Chapter...

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