Lecture Economics (19/e) - Chapter 11: Monopolistic competition and oligopoly

11 Monopolistic Competition and Oligopoly McGraw­Hill/Irwin Copyright © 2012 by The McGraw­Hill Companies, Inc. All rights reserved. Four Market Models Characteristics of the Four Basic Market Models Characteristic Number of firms Type of product Control over price Conditions of entry Nonprice competition Examples Pure Competition A very large number Standardized None Very easy, no obstacles None Agriculture Monopolistic Competition Many Differentiated Some, but within rather narrow limits Relatively easy Considerable emphasis on advertising, brand names, trademarks Retail trade, dresses, shoes Oligopoly Few Standardized or differentiated Limited by mutual inter-dependence; considerable with collusion Significant obstacles Typically a great deal, particularly with product differentiation Steel, auto, farm implements Monopoly One Unique; no close subs. Considerable Blocked Mostly public relation advertising Local utilities LO1 11-2 Monopolistic Competition • Relatively large number of sellers • Differentiated products • Easy entry and exit • Advertising LO1 11-3 Monopolistically Competitive • Industry concentration • Measured by: •Four-firm concentration ratios •Percentage of 4 largest firms 4-Firm CR = Output of four largest firms Total output in the industry •Herfindahl index • Sum of squared market shares HI = (%S1)2 + (%S2)2 + (%S3)2 + …. + (%Sn)2 LO1 11-4 Price and Output in Monopolistic Comp • Demand is highly elastic • Short run profit or loss •Produce where MR=MC • Long run normal profit •Entry and exit • Inefficient • Product variety LO2 11-5 ... - tailieumienphi.vn