ECON101 Lecture Notes - Lecture 44: Monopolistic Competition, Whopper, Marginal Revenue

• School: University of Waterloo
• Department: Economics
• Course: ECON101
• Professor: Emmanuel Carvahlo

Document Summary

Monopolistic competition: an industry composed of a large number of firms selling differentiated products ex. Fast foods restaurants, gas stations, lawyers, haircutters, accountants. Since the product are relatively similar and substitutes, the demand is relatively elastic. On the other hand, a monopoly curve would be relatively inelastic. In addition to production costs, the cost curves include the costs related to differentiating the product ex. Curves are going to be exactly like the monopoly curves although the demand is going to be slightly flatter than the monopoly curves. In order for a monopolist to maximize profit, they much push production to where mr=mc. Although the firm can be in equilibrium it can be in above, below or normal profits. If there exist above normal profits in the short run, new firms will be attracted and will enter the industry. The demand of the firms in this industry will decline and there are more firms in this industry.