ECON 208 Chapter Notes - Chapter 11: Imperfect Competition, Monopolistic Competition, Perfect Competition
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ECON 208 Full Course Notes
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Econ 208 chapter 11 imperfect competition and strategic behaviour. 11. 1 the structure of the canadian economy. The pe(cid:396)fe(cid:272)tl(cid:455) (cid:272)o(cid:373)petiti(cid:448)e (cid:373)odel does(cid:374)"t ade(cid:395)uatel(cid:455) e(cid:454)plai(cid:374) (cid:373)a(cid:374)(cid:455) i(cid:374)dust(cid:396)ies that ha(cid:448)e a large number of relatively small firms. Monopolistic competition: studies the behaviour and the outcomes in industries with many small firms, each with some market power. Most (cid:373)ode(cid:396)(cid:374) i(cid:374)dust(cid:396)ies that a(cid:396)e(cid:374)"t do(cid:373)i(cid:374)ated (cid:271)(cid:455) la(cid:396)ge fi(cid:396)(cid:373)s contain several firms: these are not competitive markets. The theory of oligopoly helps us understand industries with few large firms, each with market power, that compete actively with each other. Each firm has some power to set price free entry and exit zero profits in long-run equilibrium. Oligopoly less output than in perfect competition: excess capacity few firms, usually large strategic behaviour among firms firms often sell differentiated products and are price setters. Profits depend on the nature of firm rivalry and on entry barriers: output usually less than in perfect competition.