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
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

Explain how normal profit and abnormal profit differ. Normal profit (breakeven) - which must contain commentary on the inclusion of opportunity costs. Abnormal profit should be

Q. Show the method of applying a discount? The method of applying a discount rate to convert future monetary amounts to their equivalent value in today's terms, based on the pr

After I figure a table what do I do with it? I have no book and no study materials to answer my question



Specific Monopolist: Suppose a monopolist firm, I-Tech, pays $500,000 in short-run costs for its capital and unskilled labor. Its only short-run decision, th

Costs: If raw materials, machines and other things required for production could be made available freely then the study of the theory of the production and indeed, the study of

Inverse Demand Function: If variable factor prices changes, then the isocost line will tilt and consequently, the optimal factor requirement will be different. Suppose the wage rat

FIXED EXCHANGE RATE SYSTEM: National currencies are generally acceptable within the geographical boundaries of a country. As such, trade between countries typically involves