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
Fiscal Policy Fiscal policy refers to the management of government spending and tax policies to influence total desired spending so as to achieve the desired level of economic

Analyse the strengths and weaknesses of GDP as a measurement. Answer Strengths of GDP as a measurement 1) It helps in making international comparison among different

Measuring the Economic Value of Education A review of research works regarding the economic value of education shows that it developed in four different directions. They a

Discuss how the opportunity cost principle influence a supplier''s decision to supply labour

Q. What do you meant by Derivatives? Derivatives: A derivative is a financial asset whose resale value depends on the value of other financial assets at different points in tim


identify and discuss four major managerial factors that lead to dis-economies of scale

I purchase a used stove for $155 when I was willing to pay $185. If a new stove costs $375,what is my consumer surplus

Policies of Educational Financing - Earmarking Earmarking refers to setting aside and using the funds generated by a special cess/tax for the particular purpose for which it i

Consider an infinitely repeated prisoner's dilemma game by two players. The resultant payoffs at each stage by the actions of two players are given below in the table (payoffs are