ECON1101 Chapter Notes - Chapter 10: Imperfect Competition, Monopolistic Competition, Market Power
12 Nov 2020
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Topic 10 - monopoly and other forms of imperfect. These are markets in which firms have some ability to set their own prices (they have market power), in essence they are not pure price takers. Different forms of imperfect competition exist and they include: monopoly - 1 firm, no substitutes, oligopoly - few firms, close substitutes, monopolistic competition - many firms, slightly differentiated goods. In perfectly competitive markets, firms face a perfectly elastic demand curve (they can supply as much as they want at the market price but cannot charge any higher). In imperfectly competitive markets, the firm faces a downward sloping demand curve. Economies of scale and the importance of fixed costs. Economies of scale is a huge factor in markets with high start up costs and low reproduction costs. As quantity increases, fixed costs are spread (since atc = fixed costs / quantity + marginal cost) this means average total costs approach the marginal costs.
