This lecture will cover the material found in Chapter 13 of Case and Fair, Principles of Economics, 7/e. In the last chapter, we examined the first type of imperfectly competitive market: monopoly. In this chapter, we will extend what we know about monopoly to consider two other types of imperfectly competitive markets: monopolistic competition and oligopoly.
We discuss the unique qualities of these forms of market organization and study the different economic models of firm behavior related to them. Since most firms in the United States fall under one of these two categories of markets, it is important that we understand the efficiency properties of these markets and consider their costs and benefits. By the end of this chapter, you should be able to answer the following questions:
1. What is product differentiation and how does it relate to demand?
2. What are some of the arguments for and against advertising?
3. How do monopolistic competition and oligopoly differ?
4. Can monopolistic competitors make profit in the short run or in the long run?
5. Why do cartels have a difficult time being successful?
6. Why does the kinked demand curve have a kink?
7. How does one find optimal strategies using game theory?
8. How do contestable markets differ from perfectly competitive markets?
9. How does the Department of Justice (DOJ) determine whether a merger should be approved?