when firms exit a perfectly competitive industry, the market supply curve shifts to the left

Physical aspects of a product include all the phrases you hear in advertisements: unbreakable bottle, nonstick surface, freezer-to-microwave, non-shrink, extra spicy, newly redesigned for your comfort. We call products that are distinctive in one of these ways differentiated products. (See the Welcome to Economics! and The Keynesian Perspective chapters for more on Keynes.) Differentiated ProductsĪ firm can try to make its products different from those of its competitors in several ways: physical aspects of the product, location from which it sells the product, intangible aspects of the product, and perceptions of the product. Robinson subsequently became interested in macroeconomics and she became a prominent Keynesian, and later a post-Keynesian economist. The second was Joan Robinson of Cambridge University who published The Economics of Imperfect Competition. The first was Edward Chamberlin of Harvard University who published The Economics of Monopolistic Competition. Two economists independently but simultaneously developed the theory of imperfect competition in 1933. Who invented the theory of imperfect competition? The term “monopolistic competition” captures this mixture of mini-monopoly and tough competition, and the following Clear It Up feature introduces its derivation. However, firms producing such products must also compete with other styles and flavors and brand names. When products are distinctive, each firm has a mini-monopoly on its particular style or flavor or brand name.

There are over 600,000 restaurants in the United States. Examples include stores that sell different styles of clothing restaurants or grocery stores that sell a variety of food and even products like golf balls or beer that may be at least somewhat similar but differ in public perception because of advertising and brand names. Monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way. Analyze how advertising can impact monopolistic competition.Discuss entry, exit, and efficiency as they pertain to monopolistic competition.

Describe how a monopolistic competitor chooses price and quantity.Explain the significance of differentiated products.By the end of this section, you will be able to:

When firms exit a perfectly competitive industry, the market supply curve shifts to the left