Many Sellers There are many firms competing for the same group of customers o Product examples include books, CDS, movies, computer games, restaurants, piano lessons, cookies, furniture, etc. H arc Inc items and derived items copyright C 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Many Sellers There are many firms competing for the same group of customers. uProduct examples include books, CDs, movies, computer games, restaurants, piano lessons, cookies, furniture, etc
Product Differentiation Each firm produces a product that is at least slightly different from those of other firms o Rather than being a price taker, each firm faces a downward-sloping demand curve H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Product Differentiation uEach firm produces a product that is at least slightly different from those of other firms. uRather than being a price taker, each firm faces a downward-sloping demand curve
Free Entry or Exit e Firms can enter or exit the market without restriction。 o The number of firms in the market adjusts until economic profits are Zero。 8公个个 H arc Inc. items and derived items c ht o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Free Entry or Exit uFirms can enter or exit the market without restriction. uThe number of firms in the market adjusts until economic profits are zero
Monopolistic Competitors in the short run (a Firm Makes a Profit Price MC ATC Price laaaasasaaa Average… total cost Profit Demand MR 0 Profit maximizing quantity Quantity H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopolistic Competitors in the Short Run... (a) Firm Makes a Profit Quantity 0 Price Demand MR ATC Profit MC Profit- maximizing quantity Price Average total cost
Monopolistic Competitors in the short run ■■■ (b Firm Makes Losses MC ATC Price Losses Average total cost M Price... eman MR 0 LOss Quantity mInImIzing quantity H arc Inc items and derived items copyright o 2001 by Harcourt, Inc
Harcourt, Inc. items and derived items copyright © 2001 by Harcourt, Inc. Monopolistic Competitors in the Short Run... 0 Quantity Price Demand MR Losses (b) Firm Makes Losses MC ATC Average total cost Loss- minimizing quantity Price