This document discusses monopolistic competition, including its key characteristics, assumptions, and how firms determine costs, revenues, and profits in the short and long run. Some key aspects of monopolistic competition are that firms have differentiated products, there are many firms but some are small, and there are relatively low barriers to entry. Firms set price at the point where marginal cost equals marginal revenue to maximize profits in the short run. In the long run, firms earn normal profits and the industry reaches equilibrium. Examples given include soft drink companies, sports shoe companies, and other branded consumer goods industries.

1. Monopolistic Competition Ji Hyun, Sayaka, Johan, Avu, Oat

2. Nature of Monopolistic Competition High profile firms with high recognition brands selling similar products Branding and advertising differentiated products as superior unique aspects attracted by supernormal profits supernormal profit : profit that exceeds the normal profit or return from the input factors

3. Assumptions Size and Number of Firms relatively many but some small Barriers to Entry relatively low Consumer Sovereignty high

4. Determining costs, revenues and profit Price Output Short-run

5. Determining costs, revenues and profit Price Output Demand (AR)

6. Determining costs, revenues and profit Price Output Demand (AR) MR

7. Determining costs, revenues and profit Price Output Demand (AR) MR MC

8. Determining costs, revenues and profit Price Output Demand (AR) MR MC AC

9. Determining costs, revenues and profit Price Output Demand (AR) MR MC AC MC=MR Q1

10. Determining costs, revenues and profit Price Output Demand (AR) MR MC AC MC=MR Q1 P1 C1

11. Determining costs, revenues and profit Price Output Demand (AR) MR MC AC MC=MR Q1 P1 C1

12. Determining costs, revenues and profit Price Output Demand (AR) MR In the long-run

13. Determining costs, revenues and profit Price Output Demand (AR) MR MC In the long-run Q2

14. Determining costs, revenues and profit Price Output Demand (AR) MR MC In the long-run Q2 AC P1, C1

15. Pros and Cons The best thing about monopolistic competition is product differentiation Unlike perfect competition, products aren't generic, they vary in style, taste etc. Unlike monopoly, there are multiple products for varying needs Therefore, both the producer and consumer have market sovereignty However, like a monopoly, there is some inefficiency, and there are not long term profits

16. Pros & Cons vs. Perfect Competition In the short run, monopolistic competition markets enjoy supernormal profits as MC = MR There is product differentiation, unlike in a perfect competition There is producer sovereignty, unlike in a perfect competition However, firms not caring about each other causes lack of efficiency in firms Firms have extra capacity Firms produce too little

17. Pros and Cons vs. Monopoly Product differentiation: Monopolies have a single "unique" product, while monopolistic competitions boast many different products Very few barriers to enter the market Consumer sovereignty with ability to choose The single firm has absolute power Slightly better in the long term

18. Examples Soft drink companies Coca-cola, Pepsi... Sports shoes companies Adidas, Nike... petrol stations, restaurants, hairdressers and builders...

19. Advertising Techniques Vending machines Easy access to both students and faculties Provide sport teams with uniforms P.E. Uniforms Sport events: Baseball: shoot out shirts to audience Basketball: shoot out competition, winner get a free tee shirt Use well-known teachers/students as models for our products Available in various styles/sizes

20. Styles Ji Hyun-IT Ji Hyun-IT Baby Ji Hyun-IT Formal Ji Hyun-IT Active Ji Hyun-IT Goth

21. Ji Hyun-IT ... Model : Mr. James Lindop History / Geography Teacher "I love Ji-Hyun IT!"

22. Ji Hyun-IT Baby Model: Deepak Parwani Student / Ji-Hyun IT Lover "Ji-hyun IT is the ____"

23. Ji Hyun-IT Formal

24. Ji Hyun-IT Active

25. Ji Hyun-ITGoth