Download Chapter 10: Monopolistic Competition and Oligopoly

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Chapter 10: Monopolistic Competition and Oligopoly
LEARNING OBJECTIVES
#1 - Explain monopolistic competition in the short run.
Step 1
Read the sections in your textbook titled “The Monopolistic Competition Market
Structure,” “The Monopolistically Competitive Firm as a Price Maker, and subsection
“Monopolistic Competition in the Short Run.”
*Step 2
Watch the Graphing Workshop “See It!” tutorial titled “Short-Run Equilibrium in
Monopolistic Competition.” Study that monopolistic competitive firms set the price and
quantity corresponding to MR = MC.
Step 3
Read the Graphing Workshop “Grasp It!” exercise titled “Short-Run Equilibrium in
Monopolistic Competition.” This exercise uses a slider bar to compute profit for a
monopolistic firm at different quantities.
Step 4
Create a new graph at the Graphing Workshop “Try It!” exercise titled “Short-Run
Equilibrium in Monopolistic Competition.” This exercise illustrates a typical
monopolistic competitive firm earning a positive economic profit in the short run.
Step 5
Read the EconNews article titled “Product Profusion Packaging.” This article describes
the use of product differentiation to affect the demand curve for a product.
The Result
Following these steps, you have learned that monopolistic competition is characterized by
many firms with differentiated products and few barriers to entry. As in the perfect
competitive and monopoly models, a monopolistically competitive firms operates where
MR = MC.
#2 - Explain monopolistic competition in the long run.
Step 1
Read the subsection in your textbook titled “Monopolistic Competition in the Long Run”
and the section titled “Comparing Monopolistic Competition and Perfect Competition.”
*Step 2
Watch the Graphing Workshop “See It!” tutorial titled “Long-Run Equilibrium in
Monopolistic Competition.” Study that monopolistic competitive firms earn zero
economic profit in the long run and operate with excess capacity.
Step 3
Read the Graphing Workshop “Grasp It!” exercise titled “Long-Run Equilibrium in
Monopolistic Competition.” This exercise uses a slider bar to show that a firm operates
at the break-even price and output in the long run.
Step 4
Create a new graph at the Graphing Workshop “Try It!” exercise titled “Long-Run
Equilibrium in Monopolistic Competition.” This exercise illustrates that a
monopolistically competitive producer of blue jeans just breaks even in the long run after
the demand for jeans increased in the short run.
Step 5
Play the “Causation Chains Game” titled “New Firms, Advertising, and Demand.”
The Result
Following the steps, you have learned that a monopolistic competitive firm operates in
the long run at a higher price produces less quantity than a perfectly competitive firm. As
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a result, the monopolistic competitor operates with excess capacity and like a monopolist
it misallocates resources.
#3 - Understand oligopoly market structures including the kinked demand curve, price leadership,
the cartel, and game theory.
Step 1
Read the sections of your textbook titled “The Oligopoly Market Structure,” “Price and
Output Decisions for an Oligopolist,” and “Review of the Four Market Structures.”
*
Original Step 2 Deleted.
Step 2
Watch the Graphing Workshop “See It!” tutorial titled “A Duopoly Game.” Study how
game theory can be used to explain pricing decisions for the only two retailers of Gus’s
and Filip’s gasoline stations in a town.
Step 3
Listen to the “Ask the Instructor Video Clip” titled “Is the Auto Industry More
Competitive Now Than in the Past?” You will learn that the answer is more complex
because of foreign competition.’’
Step 4
Listen to the “Ask the Instructor Video Clip” titled “What Are the Differences Among the
Four Market Structures?” You will learn examples to illustrate monopoly, perfect
competition, monopolistic competition, and oligopoly.
Step 5
Watch the CNN Video Clip titled “Mobile Phone Numbers Now Mobile” and analyze the
differences between oligopoly and perfect competition.
Step 6
Watch the CNN Video Clip titled “Consumers Creamed by High Milk Prices” and
analyze an oligopolistic grocery market in Chicago.
The Result
Following these steps, you have learned that oligopolies are characterized by a few firms
with either homogeneous or differentiated products and high barriers to entry. You
should be able to explain each oligopoly model and compare the market characteristics of
the four market structures.
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