EC120 Lecture Notes - Lecture 16: Externality, Economic Surplus, Monopolistic Competition

• School: WLU
• Department: Economics
• Course: EC120
• Professor: Hideki Ariizumi

Document Summary

Falling in between a monopoly and a perfect competition scenario places firms in the imperfect competition category identical products. Oligopoly a market structure in which only a few sellers offer similar or. Concentration ratio the percentage of total output in the market supplied. Monopolistic competition a market structure in which many firms sell. Monopolistic competition describes a market with the following attributes: by the four largest firms, used to measure a markets domination products that are similar but not identical: many sellers, product differentiation, free entry and exit. As in a monopoly market, price exceeds marginal cost. This conclusion arises because profit maximization requires marginal revenue to equal marginal cost and because the downward sloping demand curve makes marginal revenue less than the price. As in a competitive market, price equals average total cost. This conclusion arises because free entry and exit drive economic profit to zero.