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number of firms can be too large or too small. Summary ?The product differentiation inherent in monopolistic petition leads to the use of advertising and brand names. ?Critics of advertising and brand names argue that firms use them to take advantage of consumer irrationality and to reduce petition. Summary ?Defenders argue that firms use advertising and brand names to inform consumers and to pete more vigorously on price and product quality. Graphical Review The Four Types of Market Structure Monopoly Oligopoly Monopolistic Competition Perfect Competition ? Tap water ? Cable TV ? Tennis balls ? Crude oil ? Novels ? Movies ? Wheat ? Milk Number of Firms? Type of Products? Many firms One firm Few firms Differentiated products Identical products Monopolistic Competitors in the Short Run... (a) Firm Makes a Profit Quantity 0 Price Demand MR ATC Profit MC Profit maximizing quantity Price Average total cost Monopolistic Competitors in the Short Run... Quantity 0 Price Demand MR Losses (b) Firm Makes Losses MC ATC Average total cost Loss minimizing quantity Price A Monopolistic Competitor in the Long Run... Quantity Price 0 Demand MR ATC MC Profitmaximizing quantity P=ATC Excess Capaci