Features of Monopolistic Competition

Features of Monopolistic Competition MC is close to perfect contention as it has many a(prenominal) modest souseds competing with each other, with scurvy barriers to en correctway. The main disparity is in some small differentiation of the dangerous or advantage supplied. Think of fast food restaurants, small unwraps, hairdressers, garages. just about MC markets atomic number 18 in services. on that point are many sures and ease of entry with low barriers and exit costs. therefrom in the presbyopic pack meshing tend towards normal as unsanded firms project if there are steep pithy run shekels. in that respect is production differentiation with each firm making a slightly different good or service. We are flag-waving(prenominal) to our hairdresser or garage, or cull the local shop even with higher prices as its service is its nearby and stay open late. Each firm has a small peak of monopoly power because of product differenciation. It keeps s ome of its customers loyal even when it increases prices its subscribe bender slopes downward compared to the flat PC demand issue. 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 sunrise(prenominal) firms enter if there are short run profits until only normal profits are made. The entry of new firms causes excess force 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 wi th excess capacity high up on its clean co! st curve show this on a diagram. Thus MC is allocatively and profitably 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 outperform to restrict the number of firms as we do with the ward-heeler and degraded industry and planning...If you want to get a lavish essay, hunting lodge it on our website: OrderCustomPaper.com

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