Monopolistic Competition

Monopolistic competition is a market structure in which there argon m whatsoever tautens sell products that ar similar but not identical. For example the market of books. thither are many writing and publishers selling the similar products (books) and competing for the aforesaid(prenominal) costumers. Sellers flush toilet arrive the market freely so that the market is little turn a profitable. On the former(a) hand, each(prenominal) book has different musical style and name. So, each publisher has different consideration of how much to charge. In monopolistic competition, we domiciliate see the following combination of characteristics among monopoly and perfectly hawkish market: 1. Many sellers: There are many steadys competing for the alike(p) group of costumers. 2. Product differentiation: individually producer offers products that are not identical. Thus, rather than being a price taker, each producer follows the downward sloping curve. 3. idle entry : h ouseholds can enter or exit without any restriction. Thus, the number of firms adjusts until the be firms obtain zero economic profit The Monopolistically competitive Firm in the Short effort In the short hunt, firms in monopolistically competitive market is like a monopoly. Because each firm offers different product so it follows downward sloping train to curve.

When they offer products in higher price, the consumers willingness to pay will be lower. The monopolistically competitive firms follow the rule for profit maximization. They put up level best profit when marginal revenue get even to marginal co st and then uses the require curve to view! the price. They make profit: when the market price which is shown by the demand curve exceeds the ATC They nominate loss: when the market price is under the ATC The Long Run Equilibrium In the long run when firms make profit, it will split incentive to the outside firms to enter the market. As a result, it will rise the amount of goods in the market that gives wider preferences for costumers, then slump the demand faced by the incumbent firms, and...If you want to get a full essay, separate it on our website: OrderCustomPaper.com

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