ECON 2300 Lecture Notes - Lecture 5: Market Power, Product Differentiation, Demand Curve

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9 Jan 2017

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Any firm that tried to raise its price above the prices of the other firms selling identical products would soon lose all of its customers. On the other hand, if one firm has the exclusive rights to sell a particular product, then it may be able to raise its price without losing all of its customers. Some, but not all, of its customers may switch to competitors" products. Just how many customers switch depends on how similar the customers think the products are that is, on the elasticity of the demand curve facing the firm. Economists refer to this phenomenon as product differentiation each firm attempts to differentiate its product from the other firms in the industry. The more successful it is at differentiating its product from other firms selling similar products, the more monopoly power it has that is, the less elastic is the demand curve for the product. For example, consider the soft drink industry.

Related Questions

35) A monopolistically competitive firm and a monopoly are similar because A) both firms will earn zero profits in the long run. B) both firms always operate at their point of minimum average total cost. C) each firm can raise its price without losing all of its sales. D) both firms must behave strategically toward other firms in the industry. E) each firm has a large number of small competitors.

If a monopolist is protected by barriers that prevent other firms form selling the same product, then the monopolist

A. can always increase profit by raising is the price
B. will pass on to its customers an increase in production cost
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Because land as a factor of production is fixed in supply
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If a firm borrows $8,000 from households at an anual intereest rate of 6%, how much will the firm pay in interest, payment each year?
The firm will pay $______ in interest payments each year. (as an integer)
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azureeagle924

Which of the following is true of price discrimination as a part of international pricing strategy?

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ECON 2300 Lecture Notes - Lecture 5: Market Power, Product Differentiation, Demand Curve

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