00:01
So let's talk about monopoly and monopolistic competition.
00:03
A monopoly is one firm, and therefore, they have total control over the market.
00:13
They then set marginal revenue equals to marginal cost to maximize profit.
00:23
That's their general idea.
00:25
And they earn profits by their market power.
00:29
Right? by market power.
00:36
And because they are using that market power to restrict the quantity, they generate deadweight loss.
00:46
Right? because they're not interested in producing the social optimum amount of product.
00:51
They're interested in maximizing their own profit.
00:54
Now, in monopolistic competition, things are similar.
00:59
There are many firms.
01:02
Many firms.
01:04
And these firms sell what an economist would call differentiated products.
01:09
So every firm is a little bit different.
01:12
Right? because different, each firm has a small amount of market power...