黄新飞 《微观经济学》Chapter_10--助教张翔.pptVIP

* Price MC AC What is the price and quantity in this industry and what are the economic profits? a) Price is P1, quantity is Q1 and economic profits are BHG. Price is set where MC intersects dd. b) Price is P2 , quantity is Q2 , and economic profits are P1P2GB. Price is set where MR equals MC. c) If I had a computer, I could figure it out. Monopolistic competition before entry P2 P1 G d B MR H d * AC d d MC d Price At what point will entry cease? a) Entry will cease when each seller has been forced into a long-run, no-profit tangency such as at G. b) Entry will cease where MC equals AC. c) Entry will cease when Bill Gates says it will. Monopolistic competition after entry d d G’ MR * AC d d MC d Price At what point will entry cease? a) Entry will cease when each seller has been forced into a long-run, no-profit tangency such as at G. b) Entry will cease where MC equals AC. c) Entry will cease when Bill Gates says it will. Monopolistic competition after entry d d G’ MR * AC d d MC d Price Monopolistic competition after entry d d G’ MR P1 P=MC Each producer is on the left-hand declining branch of its long run average cost curve. What do you think this means for market performance. * AC d d MC d Price Monopolistic competition after entry d d G’ MR P1 P=MC A In the long run, monopolistic competition is neither allocatively or productively efficient. An underallocation of resources occurs in the industry because the product price exceeds marginal cost. Productive efficiency is not realized because production occurs at point G where the average total cost exceeds the minimum attainable cost at Point A. * Non-Price and Aggressive Advertising The fact that that monopolistic competition is both allocatively and productively inefficient relative to the perfect competition result is not the only problem with market performance. At least some economists argue that monopolistic competition leads to both excessive advertising and needless brand proliferation Reducing the nu