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Chapter 25 Monopolistic Competition
Chapter 25 Monopolistic Competition
Chapter 25 Monopolistic Competition
Monopolistic competition: Large number of firms produce similar but not identical products Characteristics of Monopolistic competition (4): many sellers, relativly competitive differentialed products advertising no entry barriers
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Product differentiation: distinguishing of products by brand name, color, etc Firm has _______ control over the price: some _____ sloping demand curve: downward _____ differentiation, _____ price control: more, more Results of advertisting: increase demand, differentiate a product, increased profit Marginal revenue of advertisting should equal: Marginal cost of advertisting Individual demand curve is: very elastic Profit is maximized where: MR=MC Short run- it ________ for firms to make profits and losses: is possbile Short run-If price is _____ than average total costs, profits occur: greater Short run-If price is ____ than average total costs, losses occur: less Long run- profits tend to move towards: zero Long run- entry of firms....: decreases demand for one specific firm Long run equilibrium: P=Average Total Cost, zero economic profits Long run- The price is _____ to minimum average total costs: not equal Long run- Monopolist competition has _____ prices and _______ outputs: higher, lower Product differentiation works for firms because: consumers (us) value choices
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