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Monopolistic Competition
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Microeconomics Lecture 16
Monopolistic Competition
Monopolistic Competition
Brand Competition
Monopolistic Competition
Brand Competition
The Four Market Structures
The Four Market Structures
The Four Market Structures
PerfectCompetition
The Four Market Structures
PerfectCompetition
Monopoly
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
Brand
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
Examples
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
ExamplesCommodities
Rice
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
ExamplesCommodities
RiceGovernment
Utilities
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
ExamplesCommodities
RiceGovernment
Utilities
BrandsClothing
Restaurants
The Four Market Structures
PerfectCompetition
MonopolyMonopolisticCompetition
BrandOligopoly
Number of Firms
Many One Many Few
Type of Product
Identical Unique Differentiated Either
Ease of Entry
Easy Blocked Easy Hard
ExamplesCommodities
RiceGovernment
Utilities
BrandsClothing
Restaurants
ManufacturingCars
Computers
The Four Market Structures
Number MarginalCost
TotalCost
AverageCost
1
2
3
4
5
Number MarginalCost
TotalCost
AverageCost
1 5
2 4
3 6
4 9
5 16
Number MarginalCost
TotalCost
AverageCost
1 5 5 5
2 4 9 4.5
3 6 15 5
4 9 24 6
5 16 40 8
Number MarginalCost
TotalCost
AverageCost
1 40
2 60
3 90
4 160
5 250
Number MarginalCost
TotalCost
AverageCost
1 40 40 40
2 20 60 30
3 30 90 30
4 70 160 40
5 90 250 50
Number MarginalCost
TotalCost
AverageCost
1 300
2 420
3 600
4 800
5 1500
Number MarginalCost
TotalCost
AverageCost
1 300 300 300
2 540 840 420
3 960 1800 600
4 1400 3200 800
5 4300 7500 1500
Q
$
D
MR
Monopoly
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
D MR=Perfect Competition
Q
$
Monopolistic Competition
DMR
Short Run
Q
$
Monopolistic Competition
DMR
Short Run
Steep Demand
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Demand Flattens
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Demand Flattens
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Demand Flattens
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Demand Flattens
Q
$
Monopolistic Competition
DMR
Short Run
Long Run
Steep Demand
Demand Flattens
Q
$Short Run
DMR
Monopolistic Competition
Q
$Short Run
DMR
MC
Monopolistic Competition
Q
$Short Run
DMR
MC
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
Monopolistic Competition
Q
$Short Run
DMR
MC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATC
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATCProfit
QS
PS
Monopolistic Competition
Q
$Short Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATCProfit
High PriceLarge Quantity
QS
PS
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QS
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
PPSDemand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
Q
$Short Run
Long Run
DMR
MC
ATC
Profits disappearin the long run
due to competition
High PriceLarge Quantity
Lower PriceLower Quantity
QSQ
P
PS
L
L
Demand Flattens
Profit
Monopolistic Competition
D
MR
MC
Profits
D
MR
MC
Competition flattens the Demand Curve
and squeezes profits.
D
MR
MC
Competition flattens the Demand Curve
and squeezes profits.
Q
$
Market Competition
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
QLR
PLR
Q
$
Market Competition
Short Run Demand
Short Run Marginal Revenue
Long Run Demand
Long Run Marginal Revenue
Marginal Costs
AverageTotal Costs
QSR
PSR
QLR
PLR
QuizName and ID#
1. Name the four market structures.
2. What does the demand curve look like in perfect competition?
3. Why is marginal revenue different than demand in a monopoly?
4. Where are profits maximized or losses minimized?