Monopolistic competition in the short and long term. Equilibrium.

Monopolistic competition is market structure where sellers have a market power, they do not operate strategically, entrance to the market is open and buyers take price as given.

Regardless of market structure, all firms maximize profit by producing where marginal revenue equals marginal cost. In the short run, this successful firm's economic profit equals the shaded area. Monopolistic competitors may suffer short-run losses; profits would be impossible if a firm's average cost curve were always above the demand curve. Like all firms, a monopolistic competitor would minimize losses by selling that output where marginal revenue equals marginal cost, as long as the price it could set exceeded average variable costs.

Long run equilibrium curve in monopolistic competition:

Short run equilibrium curve in monopolistic competition:

14. Oligopoly markets. The strategic behavior of firms. Duopoly. Cournot model. Response curve of the firm. Equilibrium.

15.Competitive market factors of production in the short term. Imperfect competition. Monopsony.