01:220:102 Chapter Notes - Chapter 15: Monopolistic Competition, Product Differentiation, Market Power
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01:220:102 Full Course Notes
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Document Summary
Intro to microeconomics 15. 1 the meaning of monopolistic competition. Monopolistic competition - a market structure in which there are many competing producers in an industry, each producer sells a differentiated product, and there is free entry into and exit from the industry in the long run. Monopolistic competition involves 3 conditions: large numbers of competing producers differentiated products free entry into and exit from the industry in the long run each producer has some ability to set the price of her differentiated product. But exactly how high she can set it is limited by the competition she faces from other existing and potential producers that produce close, but not identical, products. The result of this differentiation is that each seller has some ability to set his own price: each producer has some albeit limited market power. Notes: differentiation by style or type differentiation by location differentiation by quality.