MGEA06H3 Lecture 16: Monopolistic Competition

• School: UTSC
• Department: Economics for Management Studies
• Course: MGEA06H3
• Professor: Donald Dewees

Document Summary

Mgea06 - lecture 16 - monopolistic competition (testing doc) In this chapter, look for the answers to these questions. Two extremes: perfect competition: many firms, identical products, monopoly: one firm. In between these extremes: imperfect competition: oligopoly: only a few sellers offer similar or identical products, monopolistic competition: many firms sell similar but not identical products. Characteristics: many sellers, product differentiation, free entry and exit. Examples: apartments, books, bottled water, clothing, fast food, night clubs. A monopolistically competitive firm earning profits in the short run. The firm faces a downward-sloping d curve. To maximize profit, firm produces q where mr = mc. The firm usesthe d curve to set p. A monopolistically competitive firm with losses in the short run. For this firm, p < atc at the output where mr = mc. The best this firm can do is to minimize its losses. Short run: under monopolistic competition firm behavior is very similar to monopoly.