SECTION VII OUTLINE

SECTION VII OUTLINE - I SECTION VII OTHER PRICE-SEARCHERS...

Info icon This preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
I. SECTION VII – OTHER PRICE-SEARCHERS’ MARKETS a. Monopolistic Competition i. Monopolistic Competition occurs in which some firms may be able to create their own individual market by product differentiaion (producing close bu imperfect substitutes for competing products) ii. In monopolistic competition each firm has managed successfully to differentiate its product in the minds of buyers iii. The demand curve for this slopes downard making the analysis analogous to monopoly iv. Marginal Revenue (MR) falls below price and firms maximize profits where margincal cost equals marginal revenue (MC=MR) instead of where marginal cost equals price v. No special barriers to new competition exist here and entry is open 1. As a result, profit seeking firms selling similar but not identical products are attracted into the industry in the long run 2. As entry occurs, the long run demand curve becomes more elastic 3. The presence of closer substituytes reinforces the rising demand elasticity vi. The fundamental novelty of the monopolistic competition model is that long run equilibrium occurs on a downward sloping section of the firm’s average total cost curve 1. They do not produce where average total cost is minimized vii. Excess profits are eliminated in monopolistic competition, but welfare losses are not 1.
Image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full Document Right Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern