00:01
Basically, we're going to be looking at an analysis of competition.
00:06
And we're basically looking at monopolistic competition in this particular instance.
00:11
Monopolyistic.
00:14
Basically, this is characterized by many buyers and sellers.
00:20
And buyers and sellers are many.
00:23
And obviously, there's a degree of monopoly.
00:28
The prices are differentiated.
00:33
I mean, the goods, looking at the types of goods, obviously, there's a differentiated.
00:40
That's the reason why, even though there's many suppliers of this particular type of commodity, but because of the differentiated nature of the product, there tends to be some kind of a degree of monopoly of the brand of that particular product.
00:58
Product, for instance.
01:00
So that's basically the characteristics of monopolistic amongst many.
01:05
There's free entry and exit, free entry and exit, for instance.
01:14
So that's basically the key in terms of describing the monopolistic competition.
01:21
But what we need to find out is that there is going to be the misallocation of resources.
01:28
In fact, it's going to be under allocation of resources with the profit maximizing level of output.
01:35
And how do you determine the profit maximizing level of profit maximizing output for a monopolistic competition, where revenues and costs are concerned in looking basically at the, if we can start off with the revenue curves, we tend to have the, demand curve or the average revenue curve being more elastic than it is in a monopoly.
02:06
So, and we tend to have the marginal revenue curve being down on slopping as well.
02:14
And obviously when you want to draw the marginal cost curve to determine where production, equilibrium production is profit maximization point occurs with a marginal cost curve, revenue is equal to marginal cost and if you can just include perhaps a cost curve the average total cost curve as well so basically if you want to look at the way the monopolistic competitor is this is the level and the shaded area here will be the profits that the monopolistic competitor will be having so basically if you look at the options that are given, we want to find out no matter, do they explain why these under allocation of resources? do they explain that? okay, so let's find out if it does.
03:14
The average total cost is not equal to mc, yes, but that does not explain...