Monopolistic Competition

Monopolistic Competition - Chapter16 Contents...

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Monopolistic Competition Chapter 16
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Contents 1. Characteristics of MC 2. Short run profit maximisation 3. Long run equilibrium 4. Assessment of MC 5. Product differentiation and Advertising
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Characteristics of MC Large number of small firms so individual decisions have little or no  impact on other firms’ decisions Differentiated products similar but not identical Low barriers to entry low economies of scale low set-up costs
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Price and Output Determination The Firm’s Demand Curve in MC is: Highly elastic, Why?  More close substitutes than a pure  monopolist Elasticity depends on  number of rivals  degree of product differentiation
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Short-Run Price and Output  Determination Rules for Profit maximization same as  under Perfect Competition MR = MC (where MC cuts MR from below) Short Run: P > AVC Long Run : P > ATC
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Economic Profits Short-Run Price and Output          Determination:  Short-Run Profits Q D P Price and Costs MR MC Q AC
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Losses Q D P Price and Costs MR MC Q ATC Short-Run Price and Output          Determination:  Short-Run Losses
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This note was uploaded on 02/08/2012 for the course TFTGFT 012 taught by Professor Hfyfgy during the Winter '11 term at Alaska Bible.

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Monopolistic Competition - Chapter16 Contents...

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