經濟學院1Chapter

9MonopolisticCompetition(

競爭市場)Chapter

9

includes:9.1

Characteristics

of

MonopolisticCompetition.9.2

Monopolistic

Competition

in

theshort-

run.9.3

Monopolistic

Competition

in

thelong-

run.2經濟學院Readings

about

the

part

ofthis

chapterZhang:

Chapter

11,P322-336Nicholson:

Chapter

19,

P537-5453經濟學院The

Spectrum（分布）

ofMarket

StructurePerfectCompetitionPureMonopolyImperfectCompetition4經濟學院Imperfect

CompetitionTwo

types

of

imperfectly

competitivemarkets:Monopolistic

Competition（

競爭市場）Many

firms

selling

products

that

are

similar

butnot

identical

(e.g.

movies).Oligopoly（寡頭市場）Only

a

few

sellers,

each

offering

a

similar

oridentical

product

to

the

others

(e.g.

hockeyskates).5經濟學院Chapter

9

includes:9.1

Characteristics

of

MonopolisticCompetition.9.2

Monopolistic

Competition

in

theshort-

run.9.3

Monopolistic

Competition

in

thelong-

run.6經濟學院Monopolistic

Competition...A

market

structure

between

perfectlycompetitive

and

monopolistic.Departs

fromthe

perfectly

competitivebecause

each

seller

offers

a

somewhatdifferent

product.Departs

from

a

monopoly

because

thereare

many

sellers,

each

of

which

is

smallcompared

to

the

market.7經濟學院Monopolistic

CompetitionDefinition

of

Monopolistic

CompetitionMarkets

that

have

some

features

ofcompetition

and

some

featuresofmonopoly.Many

firms

selling

aslightlydifferentiated

product

in

a

market

withrelatively

easy

entry

/

exit.8經濟學院Attributes

of

MonopolisticCompetition(

競爭市場的特性)

Many

Sellers

Product

Differentiation

Free

Entry/Exit

into/fromindustry9經濟學院Attribute

1:

Many

SellersMany

firms

competing

forthe

same

group

ofcustomers(顧客群)orproduct

group(產品組).Examples:books,

CDs,

movies,computer

games,restaurants,

pianolessons,

s,furniture,

etc.10經濟學院Definition

of

Product

GroupThe

output

of

a

set

of

firms

constitute

aproduct

group

if

the

substitutability

indemand

amongthe

products

is

very

highrelative

to

the

substitutability

between

thosefirms’

outputs

andother

goods

generally.the

substitutability

in

demand

among

theproducts

is

measuredby

the

cross-priceelasticity11經濟學院Attribute

2:

Product

DifferentiationAlternative

forms

of

differentiation:quality

differences;

additional

service;location;

and

packaging.Results

in

firm

facing

a

downward-slo demand

curve.Demand

curve

is

highly,

but

notperfectly,

elastic.12經濟學院Attribute

3: Free

Entry

or

ExitFirms

can

enter

or

exit

themarket

without

restriction.no

overly

restrictive

licensing（ ）

requirements.no

major

capitalrequirements.The

number

of

firms

in

themarket

adjusts

untileconomic

profits

are

zero.13經濟學院14Demand

Curve

faced

byMonopolistic

Competition’s

FirmProportionalDemand

Curve（比例需求曲線）（客觀需求曲線）Own

Demand

CurveSubjective

Demand

CurveExpected

Demand

Curve(需求曲線)Monopolistic

Competition

-

ElasticDemand

Curvety150PriceDemand經濟學院Monopolistic

Competition

-Demand

Curve

is

Distinct

from

MRCurveQ0PDemandMR16經濟學院Chapter

9

includes:9.1

Characteristics

of

MonopolisticCompetition.9.2

Monopolistic

Competition

in

theshort-

run.9.3

Monopolistic

Competition

in

thelong-

run.17經濟學院Short-Run

Operation

inMonopolistic

CompetitionIn

the

short-run,

the

monopolisticallycompetitive

firm:Follows

a

monopolist’s

rule

for

profit-ization.MR

=

SMC,

MR’<SMC’Price

>

SAC>0Price

<

SAC

<018經濟學院Monopolistic

Competition

-

ShortRunGraph

looks

similar

to

that

of

amonopolist,

but

demand

is

flatter

(moreelastic)Profit ization

is

at

output

whereMC

=

MR19經濟學院Monopolistic

Competitor

-

ShortRun20經濟學院Monopolistic

Competitor

-

ShortRun21經濟學院Monopolistic

Competitor

-

Short

RunQ0PDemandMRP>SAC

>0(Economic

Profit)SMCSACProfit-izingtyPSAC22經濟學院23Monopolistic

Competitors

in

the

Short-RunQSMCSACQ

P北r京o大f學it經M濟學a院x.PP=SACMRDemandP=SAC=024Monopolistic

Competitor

-

Short

RunQ0PDemandMRP<SAC

(Losses)SMCSACLoss-minimizingt北y京大學經濟學院SACPChapter

9

includes:9.1

Characteristics

of

MonopolisticCompetition.9.2

Monopolistic

Competition

in

theshort-

run.9.3

Monopolistic

Competition

in

thelong-

run.25經濟學院Long-Run

Operation

in

MonopolisticCompetitionIf

firms

are

making

economic

profits

in

theshort-run,

newfirms

are

encouraged

toenter

themarket.

This

results

in:Increases

the

number

of

products

offered.Reduces

demand

faced

by

firms

already

in

themarket.Incumbent

firms’(在位廠商)demand

curves

shiftto

the

left.Demand

for

the

incumbent

firms’

products

fall,and

their

profits

decline.26經濟學院Monopolistic

Competition

in

the

Long

RunFirm

Demand

Shifts

In

and

Gets

More

Elastic.Demand

Shifts

Back

Because

More

FirmsEnter

the

Industry,

So

There

is

LessDemand

Per

Firm.Demand

Gets

More

Elastic

Because

MoreFirms

Means

More

Substitutes

andMoreSubstitutes

Means

MoreElastic27經濟學院Monopolistic

Competition

in

theLong

RunLike

Perfect

Competition,

Firms

WillContinue

to

Enter

Until

There

areNo

More

Profits

to

Attract

Them.28經濟學院Long-Run

Operation

inMonopolistic

CompetitionFirms

will

enter

and

exit

until

the

firmsare

making

exactly

zero

economicprofits.Two

characteristics

of

monopolisticcompetition

in

the

long-run:Price

exceeds

marginal

costPrice

equals

average

total

cost29經濟學院經濟學院30Monopolistic

Competition

in

the

Short

RunSMCPQD0MRSACSACp*Firms

willEnterEconomicProfitMonopolistic

Competition

in

the

Long

RunLMCPQD20MR2LACP*=

LAC*D1Zero

EconomicProfit31經濟學院QDMRPPrice

andCostsQEconomicLossesFirms

willExitMonopolistic

Competition

in

theShort

RunSACSMC32經濟學院ATCMonopolistic

Competition

in

the

LongRunLMCPLACPrice

andCostsZero

EconomicProfitD2D1MR2QC33經濟學院Monopolistic

Competition

in

the

LongRun34經濟學院35A

Monopolistic

Competitor

in

the

Long-RunQLMCLAC北Q京大P學經ro濟f學it院M張a元x鵬.PP=LACDMRMonopolistic

Competition

vs.Perfect

CompetitionTwo

differences

arise

in

the

long-runbetween

monopolistic

competition

andperfect

competition:Excess

Capacity（超額能量）Markup(成本加成幅度)36經濟學院Monopolistic

Competition:Excess

CapacityIn

perfect

competition,

firmsproduce

at

the

efficient

scale,

i.e.the

point

where

average

total

costis

minimized.Free

entry

in

competitive

marketsdrive

firms

to

produce

at

theminimum

of

average

total

cost.37經濟學院北Q京大E學f經fi濟c學ie院n張t元S鵬cale38The

Competitive

Firm’s

Output

in

the

Long-RunQLMCLACP=MR=APP=MC經濟學院39Monopolistic

Competition:Excess

Capacity(超額產能)In

monopolistic

competition,

the

tyof

output

is

less

than

the

“efficient

scale”of

perfect

competition.A

monopolistically

competitive

firm

coulddecrease

the ty

it

produces

andincrease

the

average

total

cost

ofproduction.40Monopolistically

Competitive

Output

in

the

Long-RunQLMCLACQPro北d京u大c學e經d濟學院PPMCDemandMR41Monopolistically

Efficient

Output

in

the

Long-RunLMCLACQPPMCDemandMRQ北Q京大學E經f濟fi學c院ie張n元t

鵬42Monopolistically

Efficient

Output

in

the

Long-RunMCSACQPMCPMRQ北Q京大學E經f濟fi學c院ie張n元t

鵬ScaleExcessCapacityDemandMonopolistic

vs.

Perfect

Competition(a)

Monopolistically

Competitive

Firm(b)

Perfectly

Competitive

FirmtyPriceP

=

MR(demandcurve)LMCLACtyty

produced

=Efficient

scaletyproducedEfficientscaleDemandLMCLACP

=

MCExcess

capacityMarginalcos