Chapter 17

Chapter 17's main focus was on monopolistc competitive markets, and how they differed from monopolies and perfectly competitive markets, along with how they were similar to said markets. The big difference between the perfectly competitive market and monopolistic competitive market would be how the graphs are, due to the fact that there is markup in one while the other is a price taker. The markup and downward sloping demand curve cause an inefficient amount of the product being made due to the firms creating deadweight loss of transactions not occuring. This can be offset by the government subsidizing the firms so that they produce at a loss but produce at the socially efficient scale; the problem with this is that there would be many firms that would need to be subsidized, along with the fact that the taxes created to subsidize would create more deadweight loss, and would lead to a very ineffective solution overall to the problem. Being able to be a price maker, these firms can enter the market when favorable conditions are met for what they want to produce more easily based on circumstances, but the effects of brands and advertising can effect whether entry is easy or not. Unlike perfectly competitive markets, these firms can advertise for more people to use their product, as they would want as many people to buy it instead of the "set" amount that would buy it. Debate over advertisements has been constant, due to it being such a powerful tool in the market and how they can affect consumer purchase without necessarily showing information about the actual product.