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chapter 11 - Chapter 11 Product differentiation the...

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Chapter 11 Product differentiation - the different firms in an industry make products that are noticeably different Market structures - the four categories that economists have found to classify industries based on the way in which the firms interact with each other in a given industry Concentrated industry - an industry dominated by a small number of firms Monopolistic competition - has a large number of producers, easy entry and exit, production differentiation and has frequent use of non-price competition. Under monopolistic competition buyers recognize that the products are not the same. As a result, firms may engage in advertising . By advertising the firm tries to affect the shape and location of its demand curve. Advertising is one form of non-price competition . Each monopolistic competitive firm faces its own, unique demand curve. It is downward. They maximize profit where marginal revenue equals marginal cost. The long-run tendency of monopolistically competitive industry is toward zero economic profit. It does not minimize ATC. These firms have
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