Economics Dr.

Katherine Sauer

Chapter 16 Reading Notes: Monopolistic Competition I. Between Monopoly and Perfect Competition Many industries fall in between the extremes of perfect competition and monopoly markets. Two main types of imperfect competition: Oligopoly

Monopolistic Competition

Characteristics of Monopolistic Competition: -

II. Competition with Differentiated Products A. The Short Run Refer to Figure 2.

B. The Long Run Refer to Figure 3.

Two characteristics describe the long run equilibrium: -

C. Monopolistic Competition vs Perfect Competition 1. excess capacity

2. markup over marginal cost

D. Monopolistic Competition and the Welfare of Society

Two externalities: - product variety externality

- business-stealing externality

III. Advertising A. The Debate 1. Critique of advertising

2. Defense of advertising

B. Advertising as a Signal of Quality

C. Brand Names

___________________________________________________________________________________ Review the helpful table on page 345.