copyright © 2006 thomson learning 17 monopolistic competition
DESCRIPTION
Figure 1 Monopolistic Competition in the Short Run Copyright©2003 Southwestern/Thomson Learning Quantity 0 Price Profit- maximizing quantity Price Demand MR ATC (a) Firm Makes Profit Average total cost Profit MCTRANSCRIPT
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Copyright © 2006 Thomson Learning
1717Monopolistic Competition
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Figure 1 The Four Types of Market Structure
Copyright © 2004 South-Western
• Tap water• Cable TV
Monopoly(Chapter 15)
• Novels• Films
MonopolisticCompetition(Chapter 17)
• Tennis balls• Crude oil
Oligopoly(Chapter 16)
Number of Firms?
Perfect
• Wheat• Milk
Competition(Chapter 14)
Type of Products?
Identicalproducts
Differentiatedproducts
Onefirm
Fewfirms
Manyfirms
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Figure 1 Monopolistic Competition in the Short Run
Copyright©2003 Southwestern/Thomson Learning
Quantity0
Price
Profit-maximizing
quantity
Price
Demand
MR
ATC
(a) Firm Makes Profit
Averagetotal cost
Profit
MC
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Figure 1 Monopolistic Competitors in the Short Run
Copyright©2003 Southwestern/Thomson Learning
Demand
Quantity0
Price
Price
Loss-minimizing
quantity
Averagetotal cost
(b) Firm Makes Losses
MR
LossesATC
MC
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Figure 2 A Monopolistic Competitor in the Long Run
Copyright©2003 Southwestern/Thomson Learning
Quantity
Price
0
DemandMR
ATC
MC
Profit-maximizingquantity
P = ATC
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Figure 3 Monopolistic versus Perfect Competition
Copyright©2003 Southwestern/Thomson Learning
Quantity0
Price
Demand
(a) Monopolistically Competitive Firm
Quantity0
Price
P = MC P = MR(demand
curve)
(b) Perfectly Competitive Firm
MCATC
MCATC
MR
Efficientscale
P
Quantityproduced
Quantity produced =Efficient scale
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Figure 3 Monopolistic versus Perfect Competition
Copyright©2003 Southwestern/Thomson Learning
Quantity0
Price
Demand
(a) Monopolistically Competitive Firm
Quantity0
Price
P = MC P = MR(demand
curve)
(b) Perfectly Competitive Firm
mark-up
MCATC
MCATC
MR
Marginalcost
P
Quantityproduced
Quantity produced
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Figure 3 Monopolistic versus Perfect Competition
Copyright©2003 Southwestern/Thomson Learning
Quantity0
Price
Demand
(a) Monopolistically Competitive Firm
Quantity0
Price
P = MC P = MR(demand
curve)
(b) Perfectly Competitive Firm
mark-up
Excess capacity
MCATC
MCATC
MR
Marginalcost
Efficientscale
P
Quantityproduced
Quantity produced =Efficient scale