When consumers have perfect information, they will spend a lot of time shopping at different stores and perusing newspaper and magazine articles to learn about the prices and qualities of products.

A brand new store, Billy’s Boards, opens and business takes off. We would expect:

In monopolistic competition, because of product differentiation the firm can make a profit in the long-run.

As competitors enter and provide substitutes, competition increases.

Creative destruction harms workers in activities that become obsolete or inefficient.

When consumers do not differentiate between products offered by different sellers, the product turns into a “commodity”.

If rival firms can do the same thing, economic profit will be driven to zero.

Figure 6.1Refer to Figure 6.1. Given MR2, what is total revenue if the firm produces 60 units and the lowest point of the average-total-cost curve is $4?

Successful product differentiation ____ the price elasticity of demand and gives the firm ____ ability to control its price.

____ can arise as the result of economies of scale