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Monopolistic Competition
PROBLEMS AND APPLICATIONS 1. Classify the following markets as perfectly competitive, monopolistic, or monopolistically competitive, and explain your answers. a. wooden no. 2 pencils b. copper 2. For each of the following, say whether it describes a perfectly...
Monopolistic Competition
QUESTIONS FOR REVIEW 1. Describe the three attributes of monopolistic competition:’ How is monopolistic competition like monopoly? How is it like perfect competition? 2. Draw a diagram depicting a firm in a monopolistically competitive market that is making...
Monopolistic Competition
CONCLUSION Monopolistic competition is true to its name: It is a hybrid of monopoly and competition. Like a monopoly, each monopolistic competitor faces a downward-sloping demand curve and, as a result, charges a price above marginal cost. As in a perfectly...
Monopolistic Competition
BRAND NAMES Advertising is closely related to the existence of brand names. In many markets, there are two -types of firms. Some firms sell products with widely recognized brand names, while ether firms sell generic substitutes. For example, in a typical drugstore,...
Monopolistic Competition
ADVERTISING AS A SIGNAL OF QUALITY Many types of advertising contain little apparent information about the product being advertised. Consider a firm introducing a new breakfast cereal. A typical advertisement might have some highly paid actor eating the cereal and...
Monopolistic Competition
CASE STUDY ADVERTISING AND THE PRICE OF EYEGLASSES What effect does advertising have on the price of a good? On the one hand, advertising might make consumers view products as being more different than they otherwise would. If so, it would make markets less...
