01:220:102 Chapter Notes - Chapter 16: Monopolistic Competition, Demand Curve, Product Differentiation

• School: Rutgers University
• Department: Economic
• Course: 01:220:102
• Professor: Thomas Prusa

Document Summary

Chapter 16 monopolistic competition and product differentiation. Monopolistic competition is a market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry into and exit from the industry in the long run. Many producers in a monopolistically competitive industry. Each producer has a product that consumers view as somewhat distinct from the products of competing firms. Consumers see these competing products as close substitutes. Free entry and exit in the long run. New producers, with their own distinct product, can enter the industry freely in the long run. Firms will exit the industry if they find they are not covering their costs in the long run. Producers compete for the same market, so entry by more producers reduces the quantity each existing producer sells at any given price. Consumers gain from the increased diversity of products. Location matters to consumers; monopolistically competitive industries supply goods differentiated by location.