Microeconomics · free preview
Monopolistic Competition
Many differentiated sellers with free entry each face their own downward-sloping demand, price above marginal cost in the short run, and entry competes profits away to a tangency of demand and average cost.
1. The third structure
The third structure
2. Entry erodes the demand curve
Entry erodes the demand curve
3. Excess capacity and the variety question
Excess capacity and the variety question
4. The short run for the seller
The short run for the seller
5. The defining mix
Which combination defines monopolistic competition?
6. The tangency
In long-run monopolistic competition, what does the zero-profit equilibrium look like on the firm's diagram?
7. Zero profit at the margins
A monopolistically competitive firm in long-run equilibrium sells 300 units at a price of 12 dollars with average total cost of 12 dollars. Compute its economic profit in dollars and write the number.
8. Naming the structure
Which combination defines monopolistic competition?
9. The long-run picture
In long-run monopolistic competition, what does the zero-profit equilibrium look like?
10. The surviving markup
A monopolistically competitive firm in long-run equilibrium charges 12 dollars where its marginal cost is 9 dollars. Compute the markup in dollars, and write the number.
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