Chap009.1 - few rival firms produce close substitutes...

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1 Monopoly and Other Forms of Imperfect Competition Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 2 Imperfect Competition ± Perfectly Competitive Markets z Maximize economic surplus z Do not always exist ± Imperfectly Competitive Markets z Reduce economic surplus to varying degrees z Are very common Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 3 Imperfect Competition ± Imperfectly Competitive Firms z Have some control over price z Price may be greater than the cost of production z Long-run economic profits are possible Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 4 Imperfect Competition ± Various Forms of Imperfect Competition z Pure Monopoly (most inefficient) ² The only supplier of a unique product with no close substitutes z Oligopoly (more efficient than a monopoly) ² A firm that produces a product for which only a
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Unformatted text preview: few rival firms produce close substitutes Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 5 Imperfect Competition Different Forms of Imperfect Competition z Monopolistic Competition (closest to perfect competition) A large number of firms that produce slightly differentiated products that are reasonably close substitutes for one another Chapter 9: Monopoly and Other Forms of Imperfect Competition Slide 6 Imperfect Competition The Essential Difference Between Perfectly and Imperfectly Competitive Firms z The perfectly competitive firm faces a perfectly elastic demand for its product (horizontal line at the market price). z The imperfectly competitive firm faces a downward-sloping demand curve....
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