ECON 101 Lecture Notes - Lecture 18: Economic Surplus, Invisible Hand, Oligopoly
Document Summary
Competition occurs when there are many firms in a market offering essentially identical products. Monopoly occurs when there is only one firm in the market. Most markets have aspects from both types. Typically firms face competition, and have a slight degree of market power, but not great enough to be a monopoly (known as imperfect competition) Oligopoly: market structure in which only a few sellers offer similar or identical products. Monopolistic competition: a market structure in which many firms sell products that are similar but not identical. Product differentiation each firm produces a product that is slightly different from those of other firms hence downward sloping demand curve. Free entry: in the long run firms can enter and exit without restriction, so the number of firms adjusts until economic profits = 0. Competition with differentiated products: curve the price consistent with the quantity. Monopolistically competitive firm in the short run: Monopoly-like due to product differentiation, and the downward-sloping demand.
