3.3.4 Monopolistic Competition

• Firms in monopolistic competition differentiate their offerings through branding, advertising, design, or quality
• How would you describe the number of firms in monopolistic competition?

  Many small to medium-sized firms
• In monopolistic competition, firms have some control over pricing
• What is the term used to describe the ability of firms in monopolistic competition to attract consumers through branding or quality?

  Product differentiation
• How does monopolistic competition differ from a monopoly in terms of barriers to entry?

  Barriers are low
• Steps a firm in monopolistic competition might take to maximize profits

  1️⃣ Product differentiation

  2️⃣ Strategic pricing

  3️⃣ Advertising

  4️⃣ Quality improvement
• In monopolistic competition, firms can increase their price and maintain some sales
• Why is the demand curve downward-sloping in monopolistic competition?

  Some control over pricing
• What does it mean for a firm in monopolistic competition to have some control over pricing?

  They are not price-takers
• What is the primary goal of firms in monopolistic competition regarding pricing and output?

  Maximize profits
• Why does the downward-sloping demand curve in monopolistic competition give firms a trade-off between price and quantity?

  They have pricing power
• What are the methods firms use to differentiate their products in monopolistic competition?

  Branding, advertising, quality
• The ability to differentiate their products enables monopolistically competitive firms to strategically price for profit maximization.


  True
• Match the feature of monopolistic competition with its description:

  Number of Firms ↔️ Many

  Product Differentiation ↔️ Yes

  Barriers to Entry ↔️ Low

  Price Control ↔️ Some
• The characteristics of monopolistic competition distinguish it from perfect competition and monopoly.

  True
• Why do firms in monopolistic competition have some control over pricing?

  Differentiated products
• In perfect competition, firms face a perfectly elastic demand curve.


  True
• What is the primary goal of firms in monopolistic competition?

  Maximize profits
• Product differentiation allows firms in monopolistic competition to charge higher prices.
• What are the key methods firms use to differentiate their products in monopolistic competition?

  Branding, advertising, design, quality
• Product differentiation allows monopolistically competitive firms to use strategic pricing.
• Firms in monopolistic competition are allocatively and productively efficient.

  False
• Which sectors commonly exemplify monopolistic competition?

  Restaurants, hairdressers, clothing shops
• What is the defining characteristic of monopolistic competition in terms of the products offered by firms?

  Similar but not identical
• Barriers to entry are high in monopolistic competition.

  False
• Match the market structure with its demand curve:

  Monopolistic Competition ↔️ Downward-sloping

  Perfect Competition ↔️ Perfectly elastic (horizontal)
• Firms in monopolistic competition are price-takers like in perfect competition.

  False
• In monopolistic competition, firms compete using branding, quality, design, or advertising
• The demand curve in monopolistic competition is perfectly elastic.

  False
• What type of demand curve do firms in monopolistic competition face?

  Downward-sloping
• The downward-sloping demand curve in monopolistic competition requires firms to balance price and quantity sold.


  True
• In perfect competition, the demand curve is perfectly elastic
• Strategic pricing is a tool used by firms in monopolistic competition to maximize profits.


  True
• Monopolistically competitive firms face a downward-sloping demand curve, allowing them to maintain some sales when they increase their price
• Product differentiation is a key feature that allows firms in monopolistic competition to charge higher prices.


  True
• Product differentiation allows firms in monopolistic competition to have some control over pricing
• What is the role of barriers to entry and exit in monopolistic competition?

  Low barriers to entry
• Firms in monopolistic competition differentiate their products through branding, quality, design, or advertising
• What type of demand curve is featured in perfect competition?

  Perfectly elastic
• In monopolistic competition, firms use product differentiation to gain pricing power.