Documente Academic
Documente Profesional
Documente Cultură
COMPETITIVE MARKET
Perfect
Competition
Monopolistic
Competition
Oligopoly
Monopoly
No. of Sellers
Large number of
sellers
Many sellers
Few sellers
Price decision
(Price control)
Price taker
(no control over
P)
Price taker
(little control)
non-price
competition
Price maker
(some control)
Price maker
(complete control)
Type of product
Homogenous/
Identical
Slightly
differentiated
Homogenous/
Differentiated
Unique
Barriers to Entry
No barriers/ Easy
entry & exit
No barriers/ Easy
entry & exit
Completely
blocked for entry
Type of SR profit
Supernormal/
normal/
subnormal profi
Supernormal/
normal/
subnormal profit
Supernormal/
normal/
subnormal profit
Supernormal/
normal/
subnormal profit
Type of LR profit
Normal profit
Normal profit
Supernormal
profit
Supernormal
profit
Demand curve
Horizontal DD
curve, perfectly
elastic demand,
D=MR=AR=P
Downward
sloping (elastic)
P=AR=D>MR
Downward
sloping or kinked
D curve
Downward
sloping (inelastic)2
P=AR=D>MR
MONOPOLISTIC COMPETITION
MONOPOLISTIC COMPETITION
Monopolistically
competitive
As firms enter a
monopolistically
competitive market,
the demand facing
a typical firm
declines and
becomes more
elastic.
$70
MC
ATC
2. and charges
$70 per home.
d1
30
4. Kafka's monthly
profit$10,000is
the area of the
shaded rectangle.
250
10
11
12
But in long-run, free entry and exit will ensure that each
firm earns zero economic profit (normal profit) just as
under perfect competition
13
14
FIGURE 7: A MONOPOLISTICALLY
COMPETITIVE FIRM IN THE LONG RUN
In the long run, profit attracts entry,
which shifts the firm's demand
curve leftward.
Dollars
MC
ATC
$40
MR2
100
d2
250
MR1
Homes Serviced
per Month
15
LONG-RUN EQUILIBRIUM IN A
MONOPOLISTICALLY COMPETITIVE MARKET
Entry continues
until economic
profit equals zero
for a typical firm.
This equilibrium
is often referred
to as a tangency
equilibrium.
16
NONPRICE COMPETITION
17
NONPRICE COMPETITION
19
LOCATION DECISIONS
20
IMPERFECT INFORMATION
21
22