ECON101 Chapter Notes - Chapter 14: Monopolistic Competition, Average Cost, Demand Curve
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ECON101 Full Course Notes
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Monopolistic competition a market structure in which. Firms compete on product quality, price, and marketing. Each firm supplies a small part of the total industry output. Each firm has only limited power to influence price. Each firm"s price can deviate from the average price of other firms by a small amount. Must be sensitive to the average market price of the produce, but does not pay attention to any one individual competitor o o. All firms are relatively small, can not dictate market conditions. No one firm"s actions directly affect actions of other firms. Collusion firms conspire together to fix a higher price. Coordination is difficult and not possible due to the large number of firms. Product differentiation a firm makes a product that is slightly different from the products of competing firms. Close substitute but not a perfect substitute for products of other firms. Some people are willing to pay more for one variety if the product o.