-Firms make SNP in the short-run so can reinvest to increase competitiveness
-Low sunk costs
-Lots of choices for consumers increases welfare
Limitations of Monopolistic Competition
-No SNP in the long run and less SNP than a monopoly
-Lots of competition
-Allocatively and productively inefficient
Characteristics of a Monopolistic Market
-Large number of buyers and sellers
-Low barriers to entry or exit
-Slightly differentiated
Why are the AR and MR curves elastic?
Monopolistic markets have many buyers and sellers and only slightly differentiated goods thus consumers are more sensitive to changes in price as there are many substitutes.
