Chapter 6: Theory of Firm (Perfect Competition) MONOPOLISTIC COMPETITION 1. In monopolistic competition, firms charge the same price as other firms in the market since they produce identical products. 2. In monopolistic competition, firms do not have the ability to alter market price. 3. If a firm is small, produces a differentiated good for which there are many close substitutes, and it is easy to enter and exit the industry, then the firm is a monopolistic competitor. 4. Monopolistic competitive firm can influences the price of the product is known as price taker. 5 . The short-run supply curve for a monopolistically competitive firm is identical to the upward- sloping portion of the firm's marginal cost curve above average variable cost. .Monopolistically competitive firms face a upward-sloping demand curve. 7, A market that is monopolistically competitive will tend to have fewer firms than would be the case if the same market was perfectly competitive. 8. If a monopolistically competitive firm is in long-run equilibrium, then its short-run average total cost curve is tangent to its demand curve. OLIGOPOLY 1. The Copper industry is an oligopoly firm. 2. In an oligopoly, a kinked demand curve explains a price rigidity. 3. A differentiated oligopoly is a form of market organization where several different large firms produce a homogeneous commodity. 4. Oligopolistic markets are characterized by rivalries between firms that arise because the actions of each firm in an industry have an effect on the other firms in the industry. 5. The sources of oligopoly are generally the same as for monopoly, Le., barriers to entry. 6. The kinked demand curve model describes a monopolistically competitive market. 7. The kinked demand curve model provides an explanation of price rigidity in the face of changes in costs. 8. The kinked demand curve model describes a demand curve that is very elastic for price cuts and less elastic for price increases