1. Firms Overview  Perfect Competition and Monopoly= Extremes  Oligopolies and Monopolistically Competitive Firms= Dominate U.S. economy  Monopolistically competitive = most retail  Oligopoly= most manufacturing

2. Monopolistic Competition  Examples?

3. Monopolistic Competition  Demand curve is downward sloping but not as steep as that of a monopolist  Monopolistic competition is very similar to perfect competition except for a differentiated product  Short run= profits and losses  Long run= Breaks even but does not operate at the most efficient point either allocatively or productively.

4. Short-Run Equilibrium for a Monopolistic Competitor

6. Oligopoly/Game Theory  Game theory is used to explain the strategic behavior of oligopolistic firms. It is a way of explaining the effects of oligopolistic firms being highly interdependent.  Game theory is similar to a card game in which a player’s strategy depends on the cards he or she is dealt.  A dominant strategy is one that is best for one player regardless of any strategy the other player follows.  A dominated strategy is one whose outcome depends on the strategy the other player uses. It can be a good strategy if the player can predict the other player’s move.  A Nash Equilibrium is a combination of strategies that is the best response for a player given the other player’s best response. It does not always provide the best result for society.