Monopolistic_Competition2003 (1)

Add to Favourites
Post to:


Type: ppt

Discussion
Presentation Transcript Presentation Transcript

Monopolistic Competition : “Have it your way” “Snap, Crackle, Pop” “Can you hear me now?” Monopolistic Competition

PowerPoint Presentation : Most Competitive Least Competitive

PowerPoint Presentation :

PowerPoint Presentation : Monopoly Price Of ___ Quantity of _______ MR D* ATC MC

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC Graphically, the ONLY difference between the Monopoly Graph and the Monopolistic Competition Graph is the ELASTICITY OF DEMAND

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC The Demand for a Monopolistic Competitor is MORE ELASTIC because of Competition . More possible substitutes are available in the market place.

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC Same rule applies as to the PROFIT-MAXIMIZING QUNATITY as to the P.C. and Monopolist: MC=MR P mc Q mc

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC In this case, the M.C. is making economic profits…Price is GREATER than ATC… P mc Q mc ATC Economic Profit

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC Monopolistic Competitors maintain Economic Profits by Product differentiation Product attributes Service Location Brand Name/Packaging Some price control P mc Q mc ATC Economic Profit

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC Monopolistic Competitors maintain Economic Profits by 2. Advertising P mc Q mc ATC Economic Profit

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC Because of Competition and Advertising this FIRM may experience a DECREASE in DEMAND for it’s good/service P mc Q mc ATC Economic Profit

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC The Demand Curve (along with the MR Curve) will shift to the LEFT … P mc Q mc ATC Economic Profit

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ MR D* ATC MC The Demand Curve (along with the MR Curve) will shift to the LEFT… P mc ATC D 1 MR 1

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ ATC MC The FIRM will STILL produce at MC=MR and get a price of Pmc . However, because of the decrease in demand the Price is now BELOW the ATC of producing Qmc …The FIRM is experiencing ECONOMIC LOSSES P mc Q mc ATC D 1 MR 1 Economic LOSS

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ ATC MC Because of EASY ENTRY AND EXIT of FIRMS, the FIRM will IN THE LONG-RUN settle at a LONG –RUN EQUILIBRIUM where MR=MC(profit maximizing quantity) and PRICE = ATC P mc Q mc ATC D 1 MR 1

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ ATC MC This FIRM is now earning $0 Economic Profits…It is earning Normal Profits (explicit + IMPLICIT costs) P mc Q mc ATC D 1 MR 1

Productive and Allocative Efficiency in a Monopolistically Competitive Market : Productive and Allocative Efficiency in a Monopolistically Competitive Market Allocative efficiency: P=MC? · NO - At the profit maximizing level of output, the price is greater than the MC · This is a indicates that society would be better off if more resources were allocated towards this product

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ ATC MC To be PRODUCTIVELY EFFICIENT we produce where P=ATC at its MINIMUM P mc Q mc ATC D 1 MR 1

PowerPoint Presentation : Monopolistic Competition Price Of ___ Quantity of _______ ATC MC To be PRODUCTIVELY EFFICIENT we produce where P=ATC at its MINIMUM P mc Q mc ATC D 1 MR 1 The FIRM is NOT productively efficient because Price is GREATER than ATC at its minimum

13 Members Recommend
91 Followers

Your Facebook Friends on WizIQ