Summary

Summary University of Waterloo- ECON 101 – Module 11: Monopolistic Competition. Complete Solution Guide_ Fall 2024/25.

26 views 0 purchase

Course
ECON 101 Introduction to Microeconomics

Institution
ECON 101 Introduction To Microeconomics

University of Waterloo- ECON 101 – Module 11: Monopolistic Competition. Complete Solution Guide_ Fall 2024/25. ECON 101 – Module 11: Monopolistic Competition

[Show more]

Preview 2 out of 6 pages

View example

Uploaded on October 4, 2024
Number of pages 6
Written in 2024/2025
Type Summary

econ 101 module 11
econ 101 module 11 monopolistic competition
what is monopolistic competition
defining feature of monopolistic competition

CA$7.56

Added

Add to cart Add to wishlist

100% satisfaction guarantee
Immediately available after payment
Both online and in PDF
No strings attached

ECON 101 – Module 11: Monopolistic Competition

11.1What is monopolistic competition?
Features of Monopolistic Competition
 A market in which many firms compete, and implications arise:
o Each firm has a relatively small share of the market.
o No firm can dictate market conditions.
o Collusion is not viable.
 Collusion – Illegal cooperation or conspiracy to cheat or deceive others. It can
occur when firms restrict output in order to set the price higher than the
equilibrium price.
o Firms are independent of each other.
 Differentiated Product – Can be actual differences (e.g., cell phones with slightly different styles
and features), or perceived differences (e.g., Apple claiming iPhones are better than Samsung
phones); enables firms to compete in three areas:
o Quality (e.g., design, reliability, services)
o Price
o Marketing
 No barriers to entry or exit, where:
o Firms make zero economic profit in the long run.
o In the short-run, firms will enter the market if existing firms are making an economic
profit and vice versa.

Defining Feature of Monopolistic Competition
 Main difference between perfect competition and monopolistic competition is product
differentiation.
o Firms in perfect competition produce goods/services that are standardized or
homogenous in nature.
o Firms in monopolistic competition produce goods/service that are heterogenous.
 A firm in monopolistic competition has a downward-sloping demand curve, as opposed to
perfectly elastic in perfectly competitive markets.
o The more rivals, the weaker the product differentiation, the more elastic the demand
curve.
o Can somewhat set the price.
 Downward sloping MR curve; natural consequence of a downward-sloping demand curve.

11.2 Price and Output in Monopolistic Competition
The Firm’s Short-Run Output and Price Decision
Introduction
 MR = MC, profit maximizing quantity.
 Price is determined from the demand for the firm’s product and is the highest price that the firm
can charge for the profit-maximizing quantity.

This study source was downloaded by 100000891127392 from CourseHero.com on 10-04-2024 10:41:44 GMT -05:00

https://www.coursehero.com/file/239642639/Understanding-Monopolistic-Competition-Features-Price/

,  Operates like a single-price monopoly.
 Economic profit when P > ATC.

Profit Maximizing might be Loss Maximizing
 May incur economic loss in the short-run, where at the profit maximizing quantity (MR = MC), P
< ATC.

Long Run: Zero Economic Profit
 If P > ATC, firms enter the market; economic profit induces entry in the long run.
 As firms enter the industry, existing firms lose some of its market share, and demand decreases
until each firm earns zero economic profit (P = ATC).
 Decrease in demand decreases profit maximizing quantity (MR = MC) and lowers the maximum
price a firm can charge.

This study source was downloaded by 100000891127392 from CourseHero.com on 10-04-2024 10:41:44 GMT -05:00

https://www.coursehero.com/file/239642639/Understanding-Monopolistic-Competition-Features-Price/

The benefits of buying summaries with Stuvia:

Guaranteed quality through customer reviews

Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.

Quick and easy check-out

You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.

Focus on what matters

Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!

Frequently asked questions

What do I get when I buy this document?

You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.

Satisfaction guarantee: how does it work?

Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.

Who am I buying these notes from?

Stuvia is a marketplace, so you are not buying this document from us, but from seller elam17799. Stuvia facilitates payment to the seller.

Will I be stuck with a subscription?

No, you only buy these notes for CA$7.56. You're not tied to anything after your purchase.

Can Stuvia be trusted?

4.6 stars on Google & Trustpilot (+1000 reviews)

62491 documents were sold in the last 30 days

Founded in 2010, the go-to place to buy study notes for 14 years now

Start selling