1- Because ease of entry is high in both perfect competition and monopolistic competition markets, and because making economic profits will always attract new producers (entrants), how do firms survive and make profits in those markets?
Provide an example of a firm or a small business from the real world that is surviving the dynamic nature of monopolistic competition and discuss some approaches they have used (or are currently using) to compete and survive in the market.
In addition, provide an example or a scenario from your personal (or professional) experience, an observation, a story that you have read, or an idea or a thought that you might have for practical, creative, and/or effective ways to minimize production costs in order to maximize profits.
2- Class, this week we are studying perfect competition, a market structure where there are many firms all offering identical goods so that no single producer has market power. Could you compete in perfect competition? Try your hand at the Perfect Competition Game!
Go the
You are the boss! Choose your price. Choose your level of production. Complete all four rounds then answer these questions.
In Round 1, how did you choose the price you would charge? Why not reduce your price and attract more buyers? (HINT: Think about the characteristics of Perfect Competition)
In Round 2, which was higher: The average cost at your optimal rate of output or the minimum achievable average cost? Why?
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