There are two broad categories of imperfectly competitive markets The first is one in which many firms compete, each offering a slightly different product The second is one in which the industry is dominated by a few firms Important features of both kinds of markets are advertising and price discrimination, which we examine later in this chapter [1] Victoria Murphy Barrett, “Reading Your Mind,” Forbes Online, October 29, 2007, 180 Issue 9, p 50 [2] Mylene Mangalindan and Robert A Guth, “eBay Talks to Microsoft, Yahoo About a Common Foe: Google,” The Wall Street Journal Online, April 21, 2006, p A1 11.1 Monopolistic Competition: Competition Among Many LEARNING OBJECTIVES Explain the main characteristics of a monopolistically competitive industry, describing both its similarities and differences from the models of perfect competition and monopoly Explain and illustrate both short-run equilibrium and long-run equilibrium for a monopolistically competitive firm Explain what it means to say that a firm operating under monopolistic competition has excess capacity in the long run and discuss the implications of this conclusion The first model of an imperfectly competitive industry that we shall investigate has conditions quite similar to those of perfect competition The model of monopolistic competition assumes a large number of firms It Attributed to Libby Rittenberg and Timothy Tregarthen Saylor URL: http://www.saylor.org/books/ Saylor.org 569