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lOMoARcPSD
Perfect Competition
Product is standardised
Monopolistic Competition
Differentiated Products
Barriers to
Entry
No Barriers to Entry
No Barriers to Entry
Normal
Profit in the
Long Run
None
This is because no barriers to entry allow other
firms to enter when economic profit occurs,
increasing industry supply, thus reducing market
price and eroding economic profits
The converse (economic losses) is also true
None
Assumptions
/ Definition
Oligopoly
Patents
Government licences
Public franchise
o
Natural barriers
Economies of scale/scope
Sunk costs
o
Strategic behaviour of market participants
Small
Monopoly
1 seller
As in oligopoly
o
Legal barriers
o
Natural barriers
o
Strategic behaviour of other market
participants
lOMoARcPSD
Perfect Competition
Monopolistic Competition
Industry Demand in
Perfect Competition
Oligopoly
Monopoly
Demand in Monopolistic
Competition
Demand in an Oligopoly
Demand in a Monopoly
Price
Price
Price
Price
P1
De
ma
em
nd
Price elastic
an
an
em
Price inelastic
Quantity
Quantity
Firms Demand in
Perfect Competition
Price
Demand
Quantity
o
o
Demand
Quantity
Quantity
em
an
lOMoARcPSD
Perfect Competition
Monopolistic Competition
Oligopoly
As monopolistic
P=AVC
Marginal
Revenue
(=AR = Price)
Average Variable
Cost
Price
Marginal Cost
Quantity
p
Su
ply
Price
Supply
Quantity
o
o
Monopoly
As monopolistic
lOMoARcPSD
Price
g
ar
gi
ar
na
lC
lC
os
os
t2
Average Total
Cost
Marginal Cost
(= Supply)
a
in
Maximum Profit in a
Monopoly
t1
Marginal Cost
(=Supply)
Maximum Profit in an
Oligopoly
Maximum Profit in
Monopolistic Competition
Price
Average Total
Cost
Monopoly
MR=MC
Market Price
Marginal Cost
Oligopoly
MR=MC+
Price
Monopolistic Competition
MR=MC
Average Total
Cost
Perfect Competition
MR=MC (=AC)
Price
Profit
Maximisatio
n
Profit
Marginal
Revenue
(=AR = Price)
Demand
(=Average Revenue)
Demand
Marginal Revenue (=Average Revenue)
Demand
Marginal Revenue (=Average Revenue)
Marginal Revenue
Quantity
Quantity
Quantity
Quantity