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|[pic] | | |Chapter |
| | | |15 |
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| |Monopolistic | | |
| |Competition | | |
|CHAPTER OUTLINE |

I. Describe and identify monopolistic competition. A. Large Number of Firms 1. Small Market Share 2. No Market Dominance 3. Collusion Impossible B. Product Differentiation C. Competing on Quality, Price, and Marketing 1. Quality 2. Price 3. Marketing D. Entry and Exit E. Identifying Monopolistic Competition 1. The Four-Firm Concentration Ratio 2. The Herfindahl-Hirschman Index 3. Limitations of Concentration Ratios
2. Explain how a firm in monopolistic competition determines its output and price in the short run and the long run. A. The Firm’s Profit-Maximizing Decision B. Profit Maximizing Might Be Loss Minimizing C. Long Run: Zero Economic Profit D. Monopolistic Competition and Perfect Competition 1. Excess Capacity 2. Markup E. Is Monopolistic Competition Efficient 1. Deadweight Loss 2. Making the Relevant Comparison 3. The Bottom line
3. Explain why