ECON 1B03 Lecture Notes - Lecture 14: Joseph Schumpeter, Demand Curve, Monopolistic Competition

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ECON 1B03 Full Course Notes
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ECON 1B03 Full Course Notes
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Pure monopolies and perfectly competitive industries are the two extremes of market structures. Monopolistic competition is a common form of industry structure in canada with: a large number of firms, no barriers to entry, product differentiation (some degree of market power is achieved through this) An example of this competition is the restaurant business. Each produces a slightly differentiated product and attempts to distinguish itself in consumers" minds and entry to the market is not blocked. The distinctive feature of monopolistic competition and oligopoly from monopoly is that firms cannot influence market price by virtue of their size. Instead, they gain control over the price by differentiating their product slightly. Goods" substitutes are available in monopolistic competition. A concentration ratio is the percentage of total industry sales accounted for by the largest 4 (cr4) or 8 (cr8) firms in it. Shows if industries are or aren"t dominated by a small number of firms.

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