Reference no: EM133170232
This week, we learned about how economies have many different factors which various industries can be classified under. Each industry can be placed under a given model: pure competition, pure monopoly, monopolistic competition, or oligopoly.
Monopolistic-ally competitive companies consist of many companies whom each are producing different products, or what we can call heterogeneous production. For example, Crest, Aquafresh, AIM, Colgate, and/or Arm & Hammer each produce a toothpaste product; however, all are different, no two are identical. Obviously, the idea is to maximize profits to the highest extent and to do so, companies supply quantity of output where marginal revenue equals marginal cost.
Monopolistic companies are prevented from seeing positive earnings in the long run unless they are producing highly creative, innovative products and convince consumers that there is no other product on the market like theirs. Advertising is key, and companies hope that consumers will buy into or be convinced by their product and purchase it.
Answer the prompts below:
- Choose two Monopolistic-ally competitive companies from a consumer product company-for example, deodorant, laundry detergent, or toilet paper. Explain how they determine how far their prices should be from one another.
- Describe ways that the two companies compete for consumer's business through advertising. How do they differentiate? Find at least two examples to justify your response.