Characteristics

• What is meant by monopolistic competition?


  Monopolistic competition is a type of market structure where many companies are present in an industry, and they produce similar but different products.
• What are the characteristics of monopolistic competition?

  • None of the companies enjoy a monopoly, and each company operates independently without regard to the actions of other companies
  • The presence of many companies
  • Each company produces similar but differentiated products
  • Companies are not price takers
  • Free entry and exit in the industry
  • Companies compete based on product, quality, price, and how the product is marketed.
  • Non-price competition
• Why don‘t firms in monopolistic competition normally have very high output?


  There‘s many buyers and sellers so in most cases a business isn’t going to have a very high output.
• Why do firms in monopolistic competition not achieve economies of scale?


  Not achieving economies of scale as they are not big enough.
• What type of demand is there in monopolistic competition?


  elastic demand
• What does the monopolistic competition diagram look like?


  DIAGRAM BELOW:

  
• In a competitive market, what causes profits to be competed away?


  The entry of new firms into the industry, until the representative firm is making just normal profit (AR=AC).