MicroEconomics Midterm 2

The quantity that minimizes average total cost

Efficient scale

A situation where firms can enter the market without restriction

Free entry

A market structure in which many firms sell products that are similar but not identical

Monopolistic competition

Many sellers: This is in common with competition. Product differentiation: This is in common with monopoly—each firm's product is slightly different, so each firm is a price maker and faces a downward-sloping demand for its product. Free entry and exit: This is in common with competition—firms can enter or exit without restriction, so economic profits are driven to zero.

Monopolistic competition has the following characteristics:

A market structure in which only a few sellers offer similar or identical products

Oligopoly