3250:200 Lecture Notes - Lecture 16: Monopolistic Competition, Imperfect Competition, Perfect Competition
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16 Nov 2017
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Microeconomics 04 / 11 / 2017 chapter 16. Monopolistic competition perfect competition- many rms, identical products monopoly- one rm in between these extremes : imperfect competition oligopoly- only a few sellers offer similar or identical products monopolistic competition- many rms sell similar but not identical products. Monopolistic competition characteristics : examples of product differentiation by location : A monopolistically competitive firm with losses in the short run. For this rm, p < atc at the output where mr = mc. The best this rm can do is to minimize its losses. New rms enter market, taking some demand away from existing rms, prices and pro ts fall. Some rms exit the market, remaining rms enjoy higher demand and prices. Entry and exit occurs until p = atc and pro t = zero. The rms charges a markup price over marginal cost and does not produce at minimum atc.
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