Monopolistic Competition参考.ppt

Monopolistic Competition Chapter 17 The Four Types of Market Structure Types of Imperfectly Competitive Markets Monopolistic Competition Many firms selling products that are similar but not identical. Oligopoly Only a few sellers, each offering a similar or identical product to the others. Monopolistic Competition Markets that have some features of competition and some features of monopoly. Attributes of Monopolistic Competition Many sellers Product differentiation Free entry and exit Many Sellers There are many firms competing for the same group of customers. Product examples include books, CDs, movies, computer games, restaurants, piano lessons, cookies, furniture, etc. Product Differentiation Each firm produces a product that is at least slightly different from those of other firms. Rather than being a price taker, each firm faces a downward-sloping demand curve. Free Entry or Exit Firms can enter or exit the market without restriction. The number of firms in the market adjusts until economic profits are zero. Monopolistic Competitors in the Short Run... Monopolistic Competitors in the Short Run... Monopolistic Competition in the Short Run Short-run economic profits encourage new firms to enter the market. This: Increases the number of products offered. Reduces demand faced by firms already in the market. Incumbent firms’ demand curves shift to the left. Demand for the incumbent firms’ products fall, and their profits decline. Monopolistic Competition in the Short Run Short-run economic losses encourage firms to exit the market. This: Decreases the number of products offered. Increases demand faced by the remaining firms. Shifts the remaining firms’ demand curves to the right. Increases the remaining firms’ profits. The Long-Run Equilibrium Firms will enter and exit until the firms are making exactly zero economic profits. A Monopolistic Competitor in the Long Run... Two Characteristics of Long-Run Equilibrium As in a monopoly, price exceeds marginal cost.