Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed.

PART 5 Firm Behavior and the Organization of Industry
Chapter 16 of 36 - Monopolistic Competition
Section 8 of 15
…
Two main differences between monopolistic and perfect competition are
1· excess capacity
2· markup over marginal cost
…
2· Markup Over Marginal Cost (MC)
Figure 4 panel (b), for a perfectly competitive firm, price (P) always = MC.
Figure 4 panel (a), for a monopolistically competitive firm, P can be above, equal to, or below MC
…
The long-run zero-profit equilibrium condition shown in Figure 4
· ensures P equals average total cost (ATC), not necessarily lowest possible ATC
· does not ensure P = MC
In the long-run equilibrium, monopolistically competitive firms
· operate on the declining portion of their ATC curves
· so MC is below ATC
When P = ATC, P > MC.
… …
long run and short run
chōki to tanki
長期と短期

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