EC260 Chapter Notes - Chapter 7: Reservation Price, Economic Equilibrium, Longrun
Document Summary
Perfectly competitive market: managers have no market power. Monopoly markets: managers face no competition and possess plenty of market power. Manages are price takers accept decisions of aggregate market. Make quantity decisions only based on prices with no control over. No nonprice competition (everyone has to accept the price so why advertise) Monopolistic competition: many firms with products that are slightly different. Considerable emphasis placed on managers using nonprice competition ability of managers to differentiate the products. Engage in advertising and pr to increase total market demand rather than capturing sales from competitors (since there"s none) Sometimes produce identical products (e. g. steel and aluminum) Managers that produce differentiated products rely heavily on nonprice competition whereas managers that don"t do not rely heavily. Barriers to entry: barriers that determine how easily firms can enter an industry, depending on the market structure. Perfect competition: low barriers to entry (e. g. only small investment required to enter agriculture)