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Lecture Comments (7)

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Post by Rebecca Dai on November 7, 2014

In the last example, when ATC decreases, does it still intersect with MC at the minimum point? Why?

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Post by Rebecca Dai on November 7, 2014

what is excess capacity?

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Post by Rebecca Dai on November 7, 2014

Why is steeper demand curve more inelastic?

1 answer

Last reply by: Professor Jibin Park
Thu May 1, 2014 5:13 PM

Post by Richard Wolf on May 1, 2014

Don't all market structures have free entry and exit in the long run technically?

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Post by Professor Jibin Park on April 6, 2014

MC stays the same. MC is the change in TC/change in quantity. Also, you are right in that TC = FC + VC. If FC goes down, Total cost goes down but marginal cost is unaffected.

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Post by Elva Fu on April 6, 2014

In the last example, if FC is decreased, why MC stays the same? Isn't MC = change in TC/change in quantity and TC = FC + VC. Since FC cost goes down, TC goes down, and MC goes down as well?

Monopolistic Competition

  • Monopolistic Competition is a market structure in which a large amount of firms compete to sell similar but not identical products.
  • In the long-run, there is no economic profit.
  • When drawing a monopolistically competitive firm in long-run equilibrium, the ATC will be tangent to the profit-maximizing point.
  • The minimum point of the ATC will intersect the MC just like in all the other previous graphs.
  • A monopolistically competitive firm is not allocatively efficient nor is it productively efficient.
  • People prefer to pay a higher cost for variety.

Monopolistic Competition

Lecture Slides are screen-captured images of important points in the lecture. Students can download and print out these lecture slide images to do practice problems as well as take notes while watching the lecture.

  • Intro 0:00
  • Lesson Overview 0:09
  • Characteristics of Monopolistic Competition 1:01
    • Large Number of Competing Firms
    • Differentiated Products
    • Free Entry and Exit
  • Profitable Firm in Monopolistic Competition 4:10
  • Unprofitable Firm in Monopolistic Competition 7:54
  • Long-Run Zero-Profit Equilibrium 10:15
    • Profitable
    • Unprofitable
    • Demand Curve
  • Comparing Perfect and Monopolistic Competition 13:36
    • Both
    • Perfect Competition
    • Monopolistic Competition
  • Product Differentiation and Advertising 18:44
    • Differentiation by Style or Type
    • Differentiation by Location
    • Differentiation by Quality
    • Ford vs. General Motors
  • Monopolistic Competition Example 22:28