Chapter+17+Monopolistic+Competition+JBS

=**Chapter 17 Monopolistic Competition JBS **=



 * monopolistic competition:** a market structure in which many firms sell products that are similar but not identical




 * 1) Behave as both monopolists and competitors
 * 2) Attributes of Monopolistic Competition
 * Many Sellers
 * Product Differentiation
 * Free entry and exit



Short Run Profits  Long Run > 
 * Demand Demand > ATC = profit
 * Quantity where MC and MR intersects
 * P > MC just like monopoly
 * <span style="font-family: Tahoma,Geneva,sans-serif;">P = ATC
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Long run equilibrium of monopolistic competitor
 * <span style="font-family: Tahoma,Geneva,sans-serif;">P = ATC = D

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How Consumers benefit from monopolistic competition

Product-Variety Externality : Positive Externality to Market Business-Stealing Externality : Negative

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Advertising
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Product differentiation
 * <span style="font-family: Tahoma,Geneva,sans-serif;">When P > MC, to attract more ppl to this product
 * <span style="font-family: Tahoma,Geneva,sans-serif;">Give information to the customers