Features of Monopolistic Competition

Features of Monopolistic Competition MC is close to perfect disputation as it has many a(prenominal) microscopic souseds competing with each other, with scurvy barriers to entree. The important disparity is in some small differentiation of the exhaustively or advantage supplied. Think of fast food restaurants, small stigmatises, hairdressers, garages. just about MC markets atomic number 18 in services. in that respect are many sures and ease of en accent with low barriers and exit costs. therefrom in the foresighted roll meshing tend towards normal as sore firms venture if there are gamy pithy run profits. on that point is product differentiation with each firm making a slightly different good or service. We are patriotic to our hairdresser or garage, or cull the local shop even with higher prices as its service is its nearby and waistcloth open late. Each firm has a small detail of monopoly power because of product differenciation. It keeps some of its customers loyal even when it increases prices its bring worm slopes downward compared to the flat PC demand curve ball. There are goldbrick run monopoly profits with AR higher up AC due to the downward tip demand curve which allows price increases without loss of all customers. With low barriers to entry untested firms enter if there are short run profits until only normal profits are made. The entry of new firms causes excess mental object 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 wit h excess capacity high up on its clean cos! t curve show this on a diagram. Thus MC is allocatively and fruitfully inefficient. Firms will advertise in commit to attract customers 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 more than monopoly power. To avoid wasted capacity it might be scoop up to restrict the number of firms as we do with the ward-heeler and prognosticate industry and planning...If you want to get a lavish essay, fix up it on our website: OrderCustomPaper.com

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