|
|
This is only a preview of the paper
Click here to register and get the full text.
Existing members click here to login
|
|
|
I. Monopolistic Competition A. Monopolistic competition is a market structure in which a large number of firms compete, each firm produces a differentiated product, firms compete on product quality, price, and marketing, and firms are free to enter and exit. B. Large Number of Firms 1. In monopolistic competition, the industry consists of a large number of firms. Having large number of firms has three implications for the firms in the industry. 2. Small market Share a. Each firm supplies a small part of the total industry. Each firm has only limited power to influence the price of its product. Each firm’s price can deviate from the average price of other firms by a relatively small amount. 3. Ignore other firms a. A firm must be sensitive to the average market price of the product. It does not pay attention to any one individual competitor. Because all firms are relatively small, no one firm can dictate market conditions. No one firm’s actions directly affect the actions of the other firms. 4. Collusion Impossible a. Firms would like to make agreements with each other to fix a higher price, collusion. Because there are many firms, collusion is not possible. C. Product Differentiation 1. A firm practices product differentiation if it makes a product that is slightly different from the products of competing firms. A differentiated product is one that is a close substitute but not a perfect substitute for the products of the other firms. D. Competing on Quality, Price, and Marketing 1. Quality a. The quality of a product is the physical attributes that make it different from the products of other firms. This includes design, reliability, the service provided to the buyer, and the buyer’s ease of access to the product.
Approximate Word count = 1115
Approximate Pages = 4.5
(250 words per page double spaced)
|
|
|
|
|
|