Lecture_Chapter 16

Lecture_Chapter 16 - Lecture Monopolistic Competition(Chapter 16 Introduction Between Monopoly and Competition Two extremes Perfect competition

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Lecture: Monopolistic Competition (Chapter 16)
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MONOPOLISTIC COMPETITION 2 Introduction: Between Monopoly and Competition Two extremes Perfect competition: many firms, identical products Monopoly: one firm In between these extremes: imperfect competition Oligopoly : only a few sellers offer similar or identical products. Monopolistic competition : many firms sell similar but not identical products.
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MONOPOLISTIC COMPETITION 3 Characteristics & Examples of Monopolistic Competition Characteristics: Many sellers Product differentiation Free entry and exit Examples: apartments books bottled water clothing fast food night clubs
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MONOPOLISTIC COMPETITION 4 yes none, price-taker firm has market power? downward- sloping horizontal D curve facing firm differentiated identical the products firms sell zero zero long-run econ. profits yes yes free entry/exit many many number of sellers Monopolistic competition Perfect competition
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MONOPOLISTIC COMPETITION 5 yes yes firm has market power? downward- sloping downward- sloping (market demand) D curve facing firm many none close substitutes zero positive long-run econ. profits yes no free entry/exit many one number of sellers Monopolistic competition Monopoly
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MONOPOLISTIC COMPETITION 6 profit ATC P A Monopolistically Competitive Firm Earning Profits in the Short Run The firm faces a downward-sloping D curve. At each Q , MR < P . To maximize profit, firm produces Q where MR = MC. The firm uses the D curve to set P . Quantity Price ATC D MR MC Q
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COMPETITION 7 losses A Monopolistically Competitive Firm With Losses in the Short Run For this firm, P < ATC at the output where MR = MC . The best this firm
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This note was uploaded on 12/02/2011 for the course ECON ECON200 taught by Professor Songhualin during the Fall '11 term at Maryland.

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Lecture_Chapter 16 - Lecture Monopolistic Competition(Chapter 16 Introduction Between Monopoly and Competition Two extremes Perfect competition

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