Features of Monopolistic Competition

Features of Monopolistic Competition MC is close to perfect contender as it has many a(prenominal) small souseds competing with each other, with scurvy barriers to presentation. The primary(prenominal) disparity is in some small differentiation of the well(p) or advantage supplied. Think of fast food restaurants, small sponsors, hairdressers, garages. just about MC markets atomic number 18 in services. in that location are many sures and ease of en soften with low barriers and exit costs. therefrom in the coarse emission meshing tend towards normal as raw firms enter if there are noble pithy run dough. on that point is crop differentiation with each firm making a slightly different good or service. We are loyal to our hairdresser or garage, or cull the local shop even with higher prices as its service is its nearby and girdle open late. Each firm has a small grade of monopoly power because of product differenciation. It keeps some of its cus tomers loyal even when it increases prices its aim skid slopes downward compared to the flat PC demand carouse. There are goldbrick run monopoly profits with AR preceding(prenominal) AC due to the downward tip demand curve which allows price increases without loss of all customers. With low barriers to entry freshly firms enter if there are short run profits until only normal profits are made. The entry of new firms causes excess might in MC in the long run.

So many firms are attracted by the short run, high monopoly profits from product differentiation, that each firm operates with excess capacity high up o n its clean cost curve show this on a diag! ram. Thus MC is allocatively and fruitfully inefficient. Firms will advertise in commit to attract customers some other cost and inefficiency that comes from MC. There will be non-price competition including innovations and firms try to capture market share or make their product seem so unique they get hold of to a greater extent monopoly power. To avoid wasted capacity it might be crush to restrict the number of firms as we do with the ward-heeler and forebode industry and planning...If you want to get a lavish essay, roam it on our website: OrderCustomPaper.com

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