EC 201 Lecture Notes - Lecture 11: Product Differentiation, Marginal Cost, Oligopoly
57 views4 pages
Document Summary
Econ 201 lecture 11 notes- chapter 11: market entry and monopolistic competition. Monopolistic competition- a market served by many firms that sell slightly different products. Conveys two key features of the market. Each firm in the market produces a slightly different good, so each firm narrowly defines monopoly. The products sold by different firms in the market are close substitutes for one another, so there"s immense competition. If a single firm produces something, the firm-specific demand curve is the same as the market demand curve. Adding another firm shifts the firm specific demand curve to the left, they produce less. Rectangle of profit shrinks (a): profit maximized @ point a. Firm sells 300 toothbrushes at (point b). Profit (shaded area) (b): firm specific curve moved to the left. Firm produces only 200 toothbrushes for . 80 (point e). Entry of another firm squeezes profit from 3 sides.