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6 Cards in this Set
- Front
- Back
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Define Monopolistic Competition? What are five characteristics of Monopolistic Competition?
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Many firms produce similar products but each maintains some control over price.
1.Low competition ratios 20 to 40% 2. Independent production decisions 3. Low barriers to entry. 4. Market Power 5 Differentiated products. |
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Explain the importance of product differentiation and brand loyalty under monopolistic competition.
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In order for one firm to stand out from another they have to use product differentiation. Brand loyalty makes it so the demand curve is less price elastic.
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What are the monopolistic aspects of MC? What are the competitive?
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The monopolistic aspects are the "Brand Image".
The competitive aspects are the fact that a firm must compete with a large number of close substitutes. |
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How does a firm under MC determine the level of output?
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The will produce a level of output where profits are maximized MR=MC
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Explain the competitive process under MC?
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If there is profit then more producers enter the market causing supply to increase and price to decrease causing a drop in demand due to product variety and an increase in elasticity. With a loss just the opposite.
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Explain long run pricing decision?
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In long-run P=ATC. But not minimum ATC.
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