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1. How do monopolistically competitive firms set prices?

2. How are profits determined in monopolistic competition, both in the short run and in the long run?

3. How can monopolistic competition lead to inefficiency and excess capacity?

4. Why do both oligopolists and monopolistic competitors attempt to differentiate their products?

5. What is the economic significance of advertising and brand names?

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Explain (using graphs where appropriate) equilibrium, firm decision making, consumer surplus, producer surplus, profit (loss), and deadweight loss in imperfectly competitive markets and why prices in imperfectly competitive markets cannot be relied on to coordinate the actions of all possible market participants and can lead to inefficient outputs.

Calculate (using data from a graph or table as appropriate) areas of consumer surplus, producer surplus, profit (loss), and deadweight loss in imperfectly competitive markets.

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Even with a common goal of profit-maximization, market structure constrains and influences prices, output, and efficiency.

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In a market with monopolistic competition, firms producing differentiated products may earn positive, negative, or zero economic profit in the short run. Firms typically use advertising as a means of differentiating their product. Free entry and exit drive profits to zero in the long run. The output level, however, is smaller than the output level needed to minimize average total costs, creating excess capacity. The price is greater than marginal cost, creating allocative inefficiency.

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APMic Unit 4 Lesson 2 - Monopolistic Competition Flashcards | Quizlet

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Start studying APMic Unit 4 Lesson 2 - Monopolistic Competition. Learn vocabulary, terms, and more with flashcards, games, and other study tools.

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In Monopolistic Competition, there are many small firms who all have very small shares of the market. Firms have many competitors, but each one sells a slightly different product. Firms are neither price takers ( perfect competition) nor price makers ( monopolies).

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Monopolistic Competition Market Structure | Intelligent Economist

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In Monopolistic Competition, there are many small firms who all have very small shares of the market. Firms have many competitors, but each one sells a slightly different product. Firms are neither price takers ( perfect competition) nor price makers ( monopolies).

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Monopolistic Competition- Short Run and Long Run- Micro 4.12

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AP Micro: PRD (BI), PRD‑3 (EU)

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About this unit

This unit introduces students to imperfectly competitive market structures: monopoly, monopolistic competition, and oligopoly. Topics include firm behavior and efficiency in imperfectly competitive settings and game theory.

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Imperfect competition | AP®︎/College Microeconomics | Khan Academy

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AP Microeconomics: 4.3-4.4 Price Discrimination and Monopolistic Competition