Lecture Managerial economics: Chapter 14 - Dr. Hasnain Naqvi

Chapter 14 - Monopolistic competition. After studying this chapter, you will able to: Define and identify monopolistic competition, explain how output and price are determined in a monopolistically competitive industry, explain why advertising costs are high in a monopolistically competitive industry. | MONOPOLISTIC COMPETITION Understanding real-world markets Students have no difficulty seeing monopolistic competition in the world all around them. Emphasize that the work they’ve just done understanding the models of perfect competition and monopoly are not wasted because the real-world situation of monopolistic competition, as its name implies, is a mixture of both extremes. Some of what they learned in each of the two previous chapters survives and operates in the middle ground of monopolistic competition. Objectives Define and identify monopolistic competition Explain how output and price are determined in a monopolistically competitive industry Explain why advertising costs are high in a monopolistically competitive industry After studying this chapter, you will able to Understanding real-world markets Students have no difficulty seeing monopolistic competition in the world all around them. Emphasize that the work they’ve just done understanding the models of perfect . | MONOPOLISTIC COMPETITION Understanding real-world markets Students have no difficulty seeing monopolistic competition in the world all around them. Emphasize that the work they’ve just done understanding the models of perfect competition and monopoly are not wasted because the real-world situation of monopolistic competition, as its name implies, is a mixture of both extremes. Some of what they learned in each of the two previous chapters survives and operates in the middle ground of monopolistic competition. Objectives Define and identify monopolistic competition Explain how output and price are determined in a monopolistically competitive industry Explain why advertising costs are high in a monopolistically competitive industry After studying this chapter, you will able to Understanding real-world markets Students have no difficulty seeing monopolistic competition in the world all around them. Emphasize that the work they’ve just done understanding the models of perfect competition and monopoly are not wasted because the real-world situation of monopolistic competition, as its name implies, is a mixture of both extremes. Some of what they learned in each of the two previous chapters survives and operates in the middle ground of monopolistic competition. PC War Games Each PC maker tells us that they have the best product at the best price. Just two big chip makers produce almost all the processor and memory chips in our PCs. Firms in these markets are neither price takers like those in perfect competition, nor are they protected from competition by barriers to entry like a monopoly. How do such firms choose the quantity to produce and price? Monopolistic Competition Monopolistic competition is a market with the following characteristics: A large number of firms. Each firm produces a differentiated product. Firms compete on product quality, price, and marketing. Firms are free to enter and exit the industry. Monopolistic Competition Large Number of

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