Characteristics

Cards (7)

  • 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).