Chapter 10 Outline - Chapter10Outline 21:32 a o...

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Chapter 10 Outline 21:32 10-1 Monopolistic Competition a. Product differentiation o Physical differences The most obvious way products differ is in their physical  appearance and their qualities Size, weight, color, taste, texture, and so on Location The number and variety of locations where a product is available are other ways of  differentiation (special differentiation) Some products seem to be available everywhere; finding other products requires  some search and travel Services Products also differ in terms of their accompanying services Some products are delivered to your door, some to your computer, self-service, or  service performed by a well trained staff Product Image Products differ in the image the producer tries to foster in the customer’s mind Producers try to create and maintain brand loyalty through product promotion and  advertising b. Short-run profit maximization or loss minimization o The price of elasticity of the monopolistic competitor’s demand  depends on The number of rival firms that produce similar products The firm’s ability to differentiate its product from those of its  rivals A firm’s demand curve is more elastic the more substitutes there are and the less  differentiated its product is The product maximizing quantity occurs where marginal revenue equals marginal  cost; the profit-maximizing price for that quantity if found up on the demand curve There is no curve that uniquely relates prices and corresponding quantities supplied c.
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