Features of monopolistic competition, Microeconomics

Features of monopolistic competition:

Large number of firms in the industry. There are many small firms each supplying only a small share of the total market output. Hence, no firm has any perceptible influence on the price and output decisions of other firms in the industry.

Product differentiation. The firms supply products that are differentiated i.e. similar but not identical. Therefore, each firm has some degree of market power, especially some discretion as to what price to charge for its products.

Freedom of entry and exit of firms. Barriers to entry are relatively small or non- existent, and productive resources are highly mobile. Product differentiation tends to facilitate the entry of new firms in the industry.

Nature of demand curve. The demand curve for each firm’s product is downward sloping and highly price elastic due to the large number of close substitutes. Price must be lowered to sell a large quantity hence, MR curve also slopes downward and falls below the demand curve.

Posted Date: 1/3/2013 1:27:04 AM | Location : United States







Related Discussions:- Features of monopolistic competition, Assignment Help, Ask Question on Features of monopolistic competition, Get Answer, Expert's Help, Features of monopolistic competition Discussions

Write discussion on Features of monopolistic competition
Your posts are moderated
Related Questions
Why is the goal of stability and security important to many people?  What problems typically emerge during periods of instability? The instability over the business cycle can b

1. Through graphs describe the relationship between the price, P , and the average total cost, ATC , for a firm in perfect competition when it earns an economic profit; earns a n

Rule of Thumb Method Sir Ashby had been requested in 1960 by the Government of Nigeria to submit a report on manpower development in Nigeria. In doing so, in the absence of re

(i) Define the three types of price discrimination, clearly stating the different information requires of each type of discrimination. (ii) Find a real-world example of second-degr

different types of production funtion and curve given by different economist

How to solve questions of endowments?

What two important functions are performed by the price system? (1) The price system is an automatic method for distributing goods and services. (2) The price system defines t


Balance of payments account: The foreign exchange market is an organizational setting within which individuals, business firms, banks etc buy and sell foreign currency. It has

draw a production possibility frontier task using the graph and value and identity the pareto efficent and inefficient point and the marginal oppotunity cost of x for each point of