Four Market Model Summary: Monopolistic Competition - Video Tutorials & Practice Problems

Four Market Model Summary: Monopolistic Competition

Alright guys, we've done it. We've reached the end of monopolistic competition. So let's go ahead and fill in that four market model summary sheet. So remember at the beginning of the perfect competition uh, section, there was a sheet that had four columns in it. One for each market structure. I want you to pull that sheet up and we're gonna fill in the monopolistic competition column there. Alright, so let's go ahead and go down one by one here. So, the first one here, number of firms we saw that there's many firms in monopolistic competition, right? There's a lot of competition, but it's not as much as perfect competition when we think perfect competition, theoretically it's almost an infinite amount of firms compared to hear that there's still quite a lot, right. There's still many, many firms, there's a lot of competition here. Okay. Some good examples that we talked about in this chapter, we said fast food markets. Right? When we were talking about burger king and Mcdonald's a lot and other fast food joints. Right? So that was a great example of a monopolistic lee competitive market coffee as well. Right? We talked about Starbucks coffee and their competition as well, barriers to entry barriers to entry is something keeping you from starting up in this market. Right? So, if you wanted to start a fast food joint, well, all you have to do is go rent a space, get started and you could set up a fast food joint. So there's not really any barriers to entry to get into a monopolistic monopolistic competitive market, right? It's just like in perfect competition, we saw that there was no barriers to entry there as well. Right? If you wanted to start a farm for week, you just go buy a farm and you'd start farming. Cool. So we saw a profit maximizing quantity here as well. Was the marginal revenue equals the marginal cost, Right? That's where we're gonna find our profit maximizing quantity. And that is the quantity we will produce. And then uh find our profit using price from the demand curve. An average total cost from the average total cost curve. Alright. And we saw in the long run the profitability, there was no economic profit. Right? That um price was gonna equal um price was gonna equal average total cost in the long run. So there's no possibility for economic profit in the long run, because the price equals average total cost. Alright, how about the relationship between price and marginal revenue? Right. Well, we saw we had that downward sloping demand curve to the firm, right? And since they have a downward sloping demand curve, that marginal revenue is going to be less than the price. Right? The price comes from the demand curve, but that marginal revenue is less than that. So price is greater than marginal revenue here. Right? And last relationship between price and marginal cost. What we also saw that the marginal cost is gonna also be less than the price. So, so price is greater than marginal cost as well. Okay, So that's that markup over price over marginal cost. That we see where we cross marginal revenue and marginal cost to find our point where we're going to produce and then we're gonna go up to find our our price on the on the demand curve. Okay, so remember this isn't everything we talked about. We talked about some other topics as well. We showed how to calculate profit on the graph and things like that. So this doesn't include everything that we've discussed, right? There's also other details, but this is some good high level stuff that you can compare between the different market structures. Alright, cool. So let's go ahead and move on to the next chapter.