ECON 1B03 Chapter Notes - Chapter 16: Monopolistic Competition, Imperfect Competition, Perfect Competition
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ECON 1B03 Full Course Notes
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The 2 difference between monopolies and perfective competitive markets are: excess capacity: monopolistic firms operate with excess capacity because they forgo the choice to produce more output, which causes prices to decrease. The monopolistically competitive firm in the short run. Profit-maximization is at: mr = mc, where the price is charged based on the demand (like a monopoly) The short run session of a monopolistic competitive market is the same as a monopolistic market. The long-run equilibrium a. b. if a firm is making profit more firms will join the market the demand curve for each firm shifts to the left each firm makes less profit. If a firm make less profit more firms will exit the market the demand curve for each remaining firm shifts to the right remaining firms make profit. The sequence between (a) and (b) will continue until all firms make zero economic profit (the normal rate of return, price =