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46 Cards in this Set
- Front
- Back
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Monopolistic Competition
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A lot of sellers
Different products easy entry and exit they do advertise |
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Product Attributes
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Products differes in physical or quality
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Aspects of Differentiated products
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Product Attributes, service, location, Brand names, packaging.
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Service
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Providing less service to cut cost. EX: Having the customer take his shoes to the counter instead of someone one taking it
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Location
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How easy the store is accessible.
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Brand names and packaging
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People respect some brands more than others
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Some control over price
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If people want something from one sellers, they might accept a higher price. Limited because of substitutes.
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Entry to Monopolistic competitive
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Easy compared to oligopoly or pure monopoly
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Advertising
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Monopolistic competators advertise heavily.
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Herfindahl index
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The sum of the squared percentage market shares of all firms in the industry.
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Monopolistic Competition
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A lot of sellers
Different products easy entry and exit they do advertise |
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Product Attributes
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Products differes in physical or quality
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Aspects of Differentiated products
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Product Attributes, service, location, Brand names, packaging.
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Service
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Providing less service to cut cost. EX: Having the customer take his shoes to the counter instead of someone one taking it
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Location
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How easy the store is accessible.
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Brand names and packaging
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People respect some brands more than others
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Some control over price
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If people want something from one sellers, they might accept a higher price. Limited because of substitutes.
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Entry to Monopolistic competitive
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Easy compared to oligopoly or pure monopoly
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Advertising
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Monopolistic competators advertise heavily.
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Herfindahl index
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The sum of the squared percentage market shares of all firms in the industry.
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4 firms accounting for 40 percent of the market are considerend_____ and if less than 40 percent then _____
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Oligolopohy; Monopolistically competative
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Why is the demand curve for monopolistic competition not perfectly elastic?
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1) Few rivals
2) products are different, so they are not perfect substitutes. |
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Price elasticity of demand by monopolistic competitive firms depends on what
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depends on the number of rivals and how different the product is
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In SHORT RUN, monopoly competative firms _____ profit or _____ loss
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Maximize profit or minimize loss
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Where do you produce
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MR=MC
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In the long run, monopolistic comp. earn....
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Normal Profit
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What happens when a new firm enters monopolistic comp.
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demand curve shifts to the left because each firsm now has a smaller share of the total demand. Reduces economic profit.
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What will happen to the demand curve if the firms leave when experiencing loss in monopolistic comp.
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It will shift to the right(rise). Loses disappear for remaining companies.
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When does productive inefficiency occur?
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When price is greater than average total cost (P>ATC)
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When does Allocative inefficiency occur?
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When price is greater than marginal cost (P>MC)
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Product Variety
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Firms having a product that is distinguishable in some way from other products.
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Why is product variety inportant?
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So the firms can attempt to stay ahead of competatiors ad sustain profit.
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How can product variety be achieved?
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1) better product differentiation
2) Better advertising |
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How does society benefit from product variety?
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Better products and more choices...
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What is Oligopoly and how many producers...
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A market dominated by a few large producers of a homogeneous or differentiated product...FEW large producers
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What kind of products in Oligopoly
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Homogeneous and differentiated products
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Differentiated oligopoly...
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Heavy advertising
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Oligopoly; price maker or price taker?
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Price maker cause only few firms
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Oligopoly is characterized by STRATEGIC BEHAVIOR and MUTUAL INTERDEPENDENCE... what does that mean?
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STRATEGIC BEHAVIOR= self interested behavior that takes into account reaction of other. MUTUAL INTERDEPENDENCE= Each firms profit depends not only on price but also on other firms in the industry
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Entry barriers in oligopoly
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Same as pure monopoly.
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What can result from oligopoly merging?
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Increase market share and this may allow new firm to achieve greater economies of scale
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Why would companies want to merge?
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For monopoly power and merging can reduce your production cost
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Define Game theory
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Study of how people behave in strategic situations...
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3 Oligopoly models
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Kinked demand curve
Collusive pricing price leadershit |
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Limit pricing
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Strategy of establishing a price that blocks the entry of new firms
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Positive effects of advertising
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Low cost way to provide info
enchances competition speeds up techonology can help firls obtain economies of scale |
