01 monopolistic comp

Bellringer, graph news story on your slatesYou are given revenue, sketch: MC, ATC, D, MR,

different than modern films because it’s a re-release

Universal Pictures has a

technological monopoly on this

film because of copyright.

Discussion with your partner1. Why would it be bad if you were

a firm in a perfect competition market?

2. Why do consumers like perfect competition market?

3. Under what condition should a firm shut down rather than exit

the market?

Please bring your book tomorrow

Economic Competition

• 5 basic market types:– Perfect Competition– Monopolistic Competition– Oligopoly– Monopoly– Monopsony

• Measures price/nonprice competition, and product differentiation

You sell….• Your boss gives

you $100,000 to develop a plan gain some pricing power. What will you suggest the company spend money on?

You sell….• New type of pencil and

patent• New colors• New erasers• Advertise• Support gov’t regulation to

keep competition out• Sign exclusive deal with

Office Max, TUSD, College Board, etc

Monopolistic Competition Market• Features:• Many firms• Different or perceived different

products (brand names too)• Some pricing power

“price makers”• Can be easy to start new firm• Can be easy to close down

firm• Not fully informed consumers

Other Examples?

Perfect Competition

Monopolistic

CompetitionOligopoly Monopoly

On your white boards: What type of market?

• Blank DVD’s

What type of market?

• Mexican Food

What type of market?

What type of market?

What type of market?

What type of market?

• Hair cut

What type of market?

What type of market?

• Blank DVD’s

What type of market?

• Electric Power

What type of market?

• Notebook paper

What type of market?

• Hotels

Perfect Competition graph

Monopolistic Competition graph

Monopolistic Competition graph

Monopolistic Competition graph

LR Monopolistic Competition graph

• DWL

Please bring your book tomorrow