ECN 212 Lecture Notes - Lecture 11: Average Cost, Monopolistic Competition, Trivago
Document Summary
All diagrams come from patricia ramirez de la vina"s monopolistic competition, oligopoly, and game theory powerpoint. Ecn 212 - lecture 11 notes - monopolistic competition, oligopoly, game theory. Product differentiation: the product each firm produces is somewhat different from its competitors. Distance- gas stations situated close to freeways. Profit-maximizes where marginal revenue = marginal cost (mr = mc) If price > average total cost, the firm is making a profit. If price < average total cost, the firm is making a lost. Similar behavior to a monopoly in the short-run. Closer to a perfectly competitive market in the long-run because economic profit = 0. If there is a profit in the short run, new firms enter market, prices and profits fall. If there is a loss in the short-run, firms exit the market, increasing demand and prices. Produces at q, where mc = mr and charges price of p = atc.
