Monopolistic Competition 垄断竞争

8

In this chapter, look for the answers to these questions What market structures lie between perfect competition and monopoly, and what are their characteristics? How do monopolistically competitive firms choose price and quantity? Do they earn economic profit? In what ways does monopolistic competition affect society’s welfare?2

Monopolistic Competition Imperfect competition refers to those market structures that fall between perfect competition and pure monopoly. 不完全竞争是指那些介于完全竞争和完全垄 断之间的市场结构。

The Four Types of Market Structure

Number of Firms?Many firms Type of Products?

One firm

Few firms

Differentiated products

Identical products

Monopoly (Chapter 7)

Oligopoly (Chapter 9)

Monopolistic Competition (Chapter 8) Novels Movies

Perfect Competition (Chapter 6) Wheat Milk

Tap water Cable TV

Tennis balls Cigarettes

Monopolistic Competition Types of Imperfectly Competitive Markets Monopolistic Competition 垄断竞争 Many firms selling products that are similar but not identical. 很多企业出售相似的但不完全相同的产品

Oligopoly寡头 Only a few sellers, each offering a similar or identical product to the others. 只有少数几个卖者，每个卖者都提供与其他企业相似 或相同的产品。

Monopolistic Competition Markets that have some features of competition and some features of monopoly. 市场有某些竞争的特征也有垄断的特征。

Monopolistic Competition Attributes of Monopolistic Competition 垄断竞争的特征： Many sellers 许多卖者； Product differentiation 产品差别； Free entry and exit 自由进入和退出。

Monopolistic Competition Many Sellers There are many firms competing for the same group of customers. 有许多企业争夺相同的顾客群体。 Product examples include books, CDs, movies, computer games, restaurants, piano lessons, cookies, furniture, etc.

Monopolistic Competition Product Differentiation Each firm produces a product that is at least slightly different from those of other firms. 每个企业生产的一种产品至少与其他企业生产 的这种产品略有不同。 Rather than being a price taker, each firm faces a downward-sloping demand curve. 企业不是价格的接受者，而是面临一条向右下 方倾斜的需求曲线。

Monopolistic Competition Free Entry or Exit Firms can enter or exit the market without restriction. 企业可以无限制地进入或退出一个市场。 The number of firms in the market adjusts until economic profits are zero. 市场上企业的数量要一直调整到经济利润为 零时为止。

Figure 1 Monopolistic Competition in the Short Run

(a) Firm Makes Profit Price MC ATC

Price Average total cost Profit MR 0 Pro

fitmaximizing quantity Quantity

Demand

COMPETITION WITH DIFFERENTIATED PRODUCTS The Monopolistically Competitive Firm in the Short Run Short-run economic profits encourage new firms to enter the market. This: 短期经济利润鼓励新的企业进入市场。 Increases the number of products offered. 增加了所提供产品的数量。 Reduces demand faced by firms already in the market. 减少了市场已有的每家企业面临的需求。 Incumbent firms’ demand curves shift to the left. 在位企业的需求曲线向左移 Demand for the incumbent firms’ products fall, and their profits decline. 在位企业的产品需求减少，利润下降。

Figure 1 Monopolistic Competitors in the Short Run

(b) Firm Makes Losses Price MC Losses ATC

Average total cost Price

MR0 Lossminimizing quantity

Demand Quantity

COMPETITION WITH DIFFERENTIATED PRODUCTS The Monopolistically Competitive Firm in the Short Run Short-run economic losses encourage firms to exit the market. This: Decreases the number of products offered. Increases demand faced by the remaining firms. Shifts the remaining firms’ demand curves to the right. Increases the remaining firms’ profits.

The Long-Run Equilibrium Firms will enter and exit until the firms are making exactly zero economic profits. 企业将进入和退出，直到企业的经济利润恰 好为零。

Figure 2 A Monopolistic Competitor in the Long Run

Price MC

ATC

P = ATC

Demand MR 0 Profit-maximizing quantity Quantity