Nike
Monopolistic Compitition
Poll Question
How do consumers benefit from monopolistic competition??
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Advantages
1. Sellers are price makers (they set the price)
2.Produce shoes in counties w/o labor laws; Nike can pay workers 6 cents per hour in order to keep maximum profit
3. Enhances a firm's ability to improve a product's quality through its brand. Economists defend branding as a way to enhance trust and reliability to the consumer.
Disadvantages
1. Does not produce enough output to efficiently lower the average cost (ex: Jordan shoes)
2. Must use advertising to differentiate their product in order to maximize their profit
3. Similar looking products (to Adidas and Reebok)