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Unformatted text preview: Models of competition Models of Competition Perfect competition (most
competition) Monopolistic competition Oligopoly Monopoly (least competition) Models of Competition Perfect competition Large (infinite) number of buyers and sellers Suppliers are price takers Homogenized (identical) products Free mobility and access Price set equal to marginal cost Ex: agriculture Models of Competition Monopolistic Competition Many buyers and sellers Differentiated goods (trying to create a
brand monopoly) Competition through price and non price means Ex. Clothing industry Models of Competition Oligopoly Few firms dominant 5/50 or 4/60 rule, 4 firm concentration Difficult to enter industry Use of non-price competition Interdependent on one another Strategic pricing Ex: car industry Models of Competition Monopoly One firm is supplier Can control price and production Almost impossible to enter industry Creates welfare loss, where less quantity is produced at a higher price than other models of competition Price set above marginal cost Illegal in US ...
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