Principles+of+Economics+7th+Edition+Mankiw-Solution+Manual Chapter 16

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1、Chapter16/MonopolisticCompetition❖30116MONOPOLISTICCOMPETITIONsticCompetitionWHAT’SNEWINTHESEVENTHEDITION:Therearenomajorchangestothischapter.LEARNINGOBJECTIVES:Bytheendofthischapter,studentsshouldunderstand:Øwhatmarketstructuresliebetweenmonopolyandcompeti

2、tion.Øcompetitionamongfirmsthatselldifferentiatedproducts.Øhowtheoutcomesundermonopolisticcompetitionandunderperfectcompetitioncompare.Øthedesirabilityofoutcomesinmonopolisticallycompetitivemarkets.Øthedebateovertheeffectsofadvertising.Øthedebateovertherole

3、ofbrandnames.CONTEXTANDPURPOSE:Chapter16isthefourthchapterinafive-chaptersequencedealingwithfirmbehaviorandtheorganizationofindustry.Theprevioustwochaptersdevelopedthetwoextremeformsofmarketstructure—competitionandmonopoly.Themarketstructurethatliesbetweenc

4、ompetitionandmonopolyisknownasimperfectcompetition.Therearetwotypesofimperfectcompetition—monopolisticcompetitionandoligopoly.Thischapteraddressesmonopolisticcompetitionwhilethefinalchapterinthesequenceaddressesoligopoly.Theanalysisinthischapterisagainbased

5、onthecostcurvesdevelopedinChapter13.ThepurposeofChapter16istoaddressmonopolisticcompetition—amarketstructureinwhichmanyfirmssellproductsthataresimilarbutnotidentical.Monopolisticcompetitiondiffersfromperfectcompetitionbecauseeachofthemanysellersoffersasomew

6、hatdifferentproduct.Asaresult,monopolisticallycompetitivefirmsfaceadownward-slopingdemandcurvewhilecompetitivefirmsfaceahorizontaldemandcurveatthemarketprice.Monopolisticcompetitionisextremelycommon.©2012CengageLearning.AllRightsReserved.Maynotbescanned,cop

7、iedorduplicated,orpostedtoapubliclyaccessiblewebsite,inwholeorinpart.Chapter16/MonopolisticCompetition❖301KEYPOINTS:·Amonopolisticallycompetitivemarketischaracterizedbythreeattributes:manyfirms,differentiatedproducts,andfreeentry.·Thelong-runequilibriuminam

8、onopolisticallycompetitivemarketdiffersfromthatinaperfectlycompetitivemarketintworelatedways.First,eachfirminamonopolisticallycompetitivemarkethasexcesscapacity.Thatis,itchoosesaquantitythatputsitonthe