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Chapter 13 Imperfect Competition (Characteristics (Product…
Chapter 13
Imperfect Competition
Characteristics
Relatively Large number of sellers.
( 25, 35, 60, 70)
Product differentiation
Service.
Location.
Brand name.
I.E. - Coke, Ceres.
Easy entry and exit.
Non-Price Competition. "semi" price-makers.
I.E. - Advertising and product differentiation.
Control over price limited.
No Collusion.
Example of
Imperfect Competition
Monopolistic Competition
Four-Firm Concentration ratio:
Low Concentration.
usually between 0-50% ratio.
Herfindahl Index:
Lower index indicate
the likelihood that the firm
is a Monopolistic firm operating
in between Pure and monopoly
competition.
Shot-Run:
Monopolistic has the same as Pure competition.
Long Run:
Normal profit at Breaking even point.
MR = MC
Economic efficiency
MC = Price = (min) ATC
Productive efficiency:
The firm is operating at the lowest
part of the ATC curve. Min ATC = Price.
Allocate efficiency:
the firm is making use of scarce resources.
MC = Price.
