BIOCH498 Lecture Notes - Lecture 13: Harold Hotelling, Monopolistic Competition, Demand Curve

• School: University of Alberta
• Department: Biochemistry
• Course: BIOCH498
• Professor: Brian Lanoil

Document Summary

Economies of scale (output doubles = cost less than double) Firms compete by selling similar but different products by: Individual firms have a more elastic demand curve than market. Any firm maximizes its profits at the quantity where mr = mc (intersect) In the long run, the firm produces where mr = mc and pi = atci. Consider a beach that has 2 ice cream sellers. The sellers are identical except for location. Each seller gets all of the consumers who are the closest to the seller. Consumers are spread out evenly along the beach. 1 at 0. 25 and 2 at 0. 75. 1 gets half of the beach and 2 gets the other half. Average walk (one way) 1/8th of the beach. 1 and 2 at 0. 5 at the beach. Average walk = 1/4th of the beach. Example: consider a beach that is 4km long.