Chapter 11Product differentiation- the different firms in an industry make products that are noticeably differentMarket 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 industryConcentrated industry- an industry dominated by a small number of firmsMonopolistic 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
This is the end of the preview.
access the rest of the document.