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Managerial Economics and Strategy, 2/e
book

Managerial Economics and Strategy, 2/e

by Jeffrey M. Perloff, James A. Brander
February 2016
Beginner to intermediate content levelBeginner to intermediate
500 pages
33h 40m
English
Pearson
Content preview from Managerial Economics and Strategy, 2/e

11.4 Monopolistic Competition

We now turn to monopolistic competition, which is a market structure that has the price-setting characteristics of monopoly or oligopoly and the free-entry characteristic of perfect competition. Monopolistically competitive firms have market power because they face downward-sloping demand curves, as do oligopolistic firms, but the firms earn zero long-run economic profit due to free entry, as do perfectly competitive firms.

We have seen that each oligopolistic firm may earn an economic profit because the number of firms is limited due to entry barriers. What would happen without a barrier to entry? Firms seeking profits would enter the market until the last firm to enter earns zero long-run economic profit. The resulting ...

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Publisher Resources

ISBN: 9780134472553