Week 3: Imperfect Competition

Introduction Imperfect Competition

Introduction

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Last week, we answered the question of how firms in a competitive market environment should go about selecting an output quantity that will maximize profits. This week, we will address the same question for firms that operate in markets that are imperfectly competitive:

First, we will consider the extreme form of imperfect competition, monopoly power.

Second, we will look at a market form called monopolistic competition. It has characteristics of both competition and monopoly.

Finally, we will consider the oligopoly market form, when a few large firms dominate the industry in which they operate.

Imperfect Competition

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The key factor that distinguishes these three market structures...