Summary: Monopolistic competitors operate at an X-inefficient point on their ATC.
A restaurant seldom is packed to capacity. A hallmark characteristic of a firm in a monopolistically competitive market is excess capacity. Pizza Ranch, for example, might have several seats a table empty. A profit maximizing firm in the mono comp industry would be operating at a point on their ATC higher than a perfect competitor. This video gives a brief description of a mono comp firm with excess capacity. This blog is intended for AP Microeconomics.
About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA. He is an EconEdLink.org author, and also publishes the Mikeroeconomics and iMacroeconomics VB blogs.
Saturday, December 5, 2009
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