At the end of this chapter you should be able to:

Understand the importance and effects of product differentiation.

Argue the pros and cons of advertising.

Apply game theory in order to understand the concept of mutual interdependence.

Understand the differences between the two types of imperfect competition.

Explain why monopolistically-competitive firms tend to have excess capacity and are unlikely to earn long-run economic profits.

Understand why oligopoly firms often do not engage in competitive pricing.

Understand why large firms are often tempted to collude and form cartels.