Economics 1021A/B Lecture Notes - Lecture 14: Monopolistic Competition, Sports Equipment, Demand Curve
mariameelguendou and 38538 others unlocked
94
ECON 1021A/B Full Course Notes
Verified Note
94 documents
Document Summary
Firms compete a product quality, price, and marketing. Firms are free to enter and exit the industry. So no one firm"s actions directly affect the actions of others: collusion or conspiring to fix prices is impossible. Production differentiation (downward sloping demand curve: a firm in a monopolistic competition practices product differentiation if the firm makes a product that is slightly different from the products of competing firms. Competing on quality, price and marketing: quality includes design, reliability, and service, because firms produce differentiated products, the demand for each firm"s product is downward sloping. But there is a tradeoff between price and quality: because products are differentiated, a firm must market its product. Marketing takes the two main forms advertising and packaging. Entry and exit: there are no barriers to entry in monopolistic competition, so firms cannot make an economic profit in the long run.