Chapter 16 Summary

Chapter 16 Summary - Chapter 16 Summary: Monopolistic...

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Chapter 16 Summary : Monopolistic Competition The line of demarcation between oligopoly and monopolistic competition is not as well defined as the line between pure competition and monopoly. This market structure combines some features typical of a monopoly with those typical of pure competition. Because each firm is offering a distinct product, it is in a way like a monopolist: it faces a downward sloping demand curve (and MR curve) and has some market power – the ability (within limits) to determine the price of its product. They are unlike the perfect competitor in this sense (who has a flat demand curve). But unlike a monopolist, it does face competition. The amount of product it can sell depends on the prices and products offered by other firms in the industry. Demand here is quite price elastic. They are not the same as an oligopolist, because there exists many firms and free entry. No large economies of scale occur here. Remember: the oligopolist faces competition among a smaller number of firms in an industry protected by barriers to entry and whose profits are highly interdependent. The Monopolistically Competitive structure is characterized by several producers competing to sell
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Chapter 16 Summary - Chapter 16 Summary: Monopolistic...

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