ECON 101- Midterm Exam Guide - Comprehensive Notes for the exam ( 13 pages long!)
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ECON 101 Full Course Notes
Verified Note
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Document Summary
Chapter 15 - monopolistic competition and product differentiation. Each producer has a product that consumers view as somewhat distinct from the products of competing firms, however consumers see competing products as close substitutes. Free entry and exit in the long run . Profitable because each consumer has different tastes. Proximity is key for this type of differentiation. Key for service industries (ex: gas stations) Consumers vary their willingness to pay for higher quality producers can differentiate their products quality and vary price. Zero-profit equilibrium - maximizing output quantities. Price, marginal cost, and average total cost. Everyone monopolistic competitor has this problem inefficiency. Excess capacity implies wasteful duplication bc they offer too many varieties. Goal: convince people to buy more of a seller"s product at the going price. Expensive advertising serves to establish the quality of a firm"s products in the eyes of consumers. Names owned by particular companies that differentiate their products in the minds of consumers.
