MONOPOLISTIC COMPETITION
stic CompetitionWHAT’S NEW IN THE SEVENTH EDITION:
There are no major changes to this chapter.
LEARNING OBJECTIVES:安全知识有哪些
By the end of this chapter, students should understand:
老人与海教案what market structures lie between monopoly and competition.
competition among firms that ll differentiated products.
how the outcomes under monopolistic competition and under perfect competition compare.
the desirability of outcomes in monopolistically competitive markets.
the debate over the effects of advertising.
夏天的词语有哪些 the debate over the role of brand names.
CONTEXT AND PURPOSE:
Chapter 16 is the fourth chapter in a five-chapter quence dealing with firm behavior and the organization of industry. The previous two chapters developed the two extreme forms of market structure—competition and monopoly. The market structure that lies between competition and monopoly is known as imperfect competition. There are two types of imperfect competition—monopolistic competition and oligopoly. This chapter address monopolistic competition while the final chapter in the quence address oligopoly. The analysis in this chapter is again bad on the cost curves developed in Chapter 13.
The purpo of Chapter 16 is to address monopolistic competition—a market structure in which many firms ll products that are similar but not identical. Monopolistic competition differs from perfect competition becau each of the many llers offers a somewhat different product. As a result, monopolistically competitive firms face a downward-sloping demand curve while competitive firms face a horizontal demand curve at the market price. Monopolistic competition is extremely com
mon.
KEY POINTS:
A monopolistically competitive market is characterized by three attributes: many firms, differentiated products, and free entry.
The long-run equilibrium in a monopolistically competitive market differs from that in a perfectly competitive market in two related ways. First, each firm in a monopolistically competitive market has excess capacity. That is, it choos a quantity that puts it on the downward-sloping portion of the average-total-cost curve. Second, each firm charges a price above marginal cost.
Monopolistic competition does not have all of the desirable properties of perfect competition. There is the standard deadweight loss of monopoly caud by the markup of price over marginal cost. In addition, the number of firms (and thus the variety of products) can be too large or too small. In practice, the ability of policymakers to correct the inefficiencies is limited.
The product differentiation inherent in monopolistic competition leads to the u of advertising and brand names. Critics of advertising and brand names argue that firms u them to manipulate consu
mers’ tastes and to reduce competition. Defenders of advertising and brand names argue that firms u them to inform consumers and to compete more vigorously on price and product quality.
CHAPTER OUTLINE:
I. Between Monopoly and Perfect Competition
A. The typical firm has some market power, but its market power is not as great as that described by monopoly.
B. Firms in imperfect competition lie somewhere between the competitive model and the monopoly model.
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C. Definition of oligopoly: a market structure in which only a few llers offer similar or identical products.
1. Economists measure a market’s domination by a small number of firms with a statistic called a concentration ratio.
2. The concentration ratio is the percentage of total output in the market supplied by the four larges
t firms.
3. In the U.S. economy, most industries have a four-firm concentration ratio under 50%.
D. Definition of monopolistic competition: a market structure in which many firms ll products that are similar but not identical.
1. Characteristics of Monopolistic Competition
a. Many Sellers
逻辑推理题>年夜饭预定
b. Product Differentiation
c. Free Entry
E. Figure 1 summarizes the four types of market structure. Note that it is the number of firms and the type of product sold that distinguishes one market structure from another.
从化石门森林公园
win7怎么录屏Draw a table with the four types of markets across the top. Create rows for various market characteristics such as type of product sold, number of firms, control over price, freedom of entry and exit, and ability to earn profit in the long run. Students will then be able to e how the characteristics relate to one another.
