ECON15269G-CO4 Study Guide - Final Guide: Monopolistic Competition, Trade Union, Perfect Competition
24 Apr 2015
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Competitive industries: many small firms, easy to enter, producers unable to control supply. Concentrated industries: few firms, difficult to enter, producers may be able to make agreements to increase prices & restrict supply. Prices & profits tend to be > average. Perfect competition: many small sellers, easy for new firms to enter, all firms sell identical products. The most competitive imaginable situation: sellers have no control over supply or price, prices and profits are forced to minimum levels. Eg- many small farmers selling vegetables to wholesalers, canners, & processors. If any firm increases its price its sales fall to zero: each firm has no control over the price. Incentives for each firm are to: produce as must output as possible, produce it as efficiently as possible, charge the market price, maximum output/minimum price. Monopolistic competition: many small sellers, easy for new firms to enter, each firm"s product is differentiated from competitors" products.
