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This is Damien the Detective, and he lives on a block with a bunch of other kids. One
day he got a call to inspect a local lemonade stand. On his block there are many kids selling
their lemonade. Damien got a clue to check out Peter's stand for high prices. Damien
went up to Peter and told him "You can't sell your lemonade for such a high price because
everyone else is selling their lemonade for a lower prices so you won't sell any." When
Peter asked why, Damien told him that it's because their block is perfectly competitive,
meaning there are many sellers and they can't choose a price. Peter told Damien "I'll lower
my price when Mikey on the next block lowers his!He has lots of other sellers too and his
prices are high!"Curious, Damien decided to visit Mikey and see why his prices were so
high. The next block over was a lot different than Damien's block. Although there were many
sellers, they all sold different juices. Mikey sold lemonade, but there was also apple juice,
orange juice, and grape juice. Damien asked Mikey why he was charging such a high price
for lemonade, and Mikey told Damien that he could charge a higher price because his block
had differentiated product, meaning that the juices were similar, but not the same. Since
there were still many sellers and differentiated product, Mikey could charge a higher price
for his lemonade. He told Damien to tell Peter that he sells in an monopolistically competitive
market, so there was no crime. "The only crime I know of is the price of lemonade on Olivia's
block,"Mikey whispered to Damien. Damien decided to investigate. On the next block over, Olivia's
prices were so high Damien couldn't believe his eyes!Olivia's block had a few sellers,
but Damien noticed two working together:Olivia and Ollie. Damien asked why her prices were
so much higher than Mikey's or Peter's, Olivia said "I can charge higher prices because I'm
working with Ollie. Since I have more power working with Ollie, I have more power over
the price than Mikey or Peter."Damien asked Ollie why they chose such a high price and
Ollie told him "When we work together, there is less competition. We have to trust each
other a lot or mom says we won't get money OR dessert. That's called Game Theory." Olivia
told Damien "We can't get into trouble because we are oligopolists. If you're looking for
trouble, you should check out Moe's stand." Determined to enforce the law, Damien headed
another block over. Moe was the only seller on his block and his prices were sky high!
Damien asked Moe why and Moe told him "I'm the only seller here so I can charge whatever
I want!" He didn't get many customers though. Damien looked at Moe's prices and asked "What
if I don't want to pay this much?" Moe told him that he owns a monopoly on his block,
so if Damien wanted a lower price, he'd have to go somewhere else. And Damien did just
that. He went back to his block and told Peter all about the other blocks. Peter said "So
I can't charge a higher price because there are so many others selling lemonade?" "That's
right!" Damien said. So Peter started to pack up his stand and told Damien "I'm going to
see if I can move to Moe's block tomorrow."