Chapter 24 - Monopolistic competition. The following will be discussed in this chapter: The monopolistic competitor in the short and long runs, product differentiation, the characteristics of monopolistic competition, price discrimination. | Monopolistic Competition Chapter 24 24-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The monopolistic competitor in the short and long runs Product differentiation The characteristics of monopolistic competition Price discrimination 24-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. A monopolistically competitive industry has many firms selling a differentiated product Differentiated means the buyer, for whatever reason, make a difference between one product and another Identical means the buyer makes no difference between one product and anther product No one firm has any significant influence on price 24-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Monopolistic Competition Defined 24-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Monopolistic Competitor in the Short Run The monopolistic competitor can make a profit or take a loss As only one firm in a crowded industry it has a very elastic demand curve No one firm can get too far out of line on price because buyers can always purchase a substitute from someone else 24-5 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Monopolistic Competitor in the Short Run The monopolistic competitor can make a profit or take a loss As only one firm in a crowded industry it has a very elastic demand curve No one firm can get too far out of line on price because buyers can always purchase a substitute from some one else D MR Monopolistic competitor D MR Monopoly 24-6 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Monopolistic Competitor Making a Profit in the Short Run Output is 60 Price is $15 ATC is $ Total Profit=(Price-ATC) X Output =($15-$) X 60 =($) X 60 = $174 24-7 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Monopolistic Competitor Taking a Loss in the Short Run Output is 42 Price is $11 ATC is . | Monopolistic Competition Chapter 24 24-1 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter Objectives The monopolistic competitor in the short and long runs Product differentiation The characteristics of monopolistic competition Price discrimination 24-2 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. A monopolistically competitive industry has many firms selling a differentiated product Differentiated means the buyer, for whatever reason, make a difference between one product and another Identical means the buyer makes no difference between one product and anther product No one firm has any significant influence on price 24-3 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. Monopolistic Competition Defined 24-4 Copyright 2002 by The McGraw-Hill Companies, Inc. All rights reserved. The Monopolistic Competitor in the Short Run The monopolistic competitor can make a profit or take a loss As only one firm in a
