01:220:102 Lecture Notes - Lecture 21: Allocative Efficiency, Monopolistic Competition, Productive Efficiency

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Published on 15 Nov 2018
Department
Professor
ECON 102 - Lecture 21
Efficiency
Productive efficiency- the equality of price and Minimum ATC yields productive
efficiency
P = min ATC
Allocative efficiency - the equality of price and MC yields allocative efficiency
Inefficient
Productive inefficiency
P > min ATC
Allocative inefficiency
P > MC
In monopolistic competition neither productive nor allocative efficiency occurs in the
long run
Firms in a monopolistically competitive industry have excess capacity: they produce less than
the output at which average total cost is minimized
Profit Margin inversely related to level of elasticity
In a perfectly elastic market elasticity is infinite
Product Differentiation
Comparative advertising
A form of advertising where a firm attempts to increase the demand for its brand
by differentiating its product frmo its competitors
niche marketing
A marketing strategy where goods and services are tailored to meet the needs of a
particular segment of the market
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