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. there argon many writing and publishers selling the similar products (books) and competing for the analogous costumers. Sellers flush toilet ship the market freely so that the market is little turn a profitable. On the former(a) hand, apiece book has different musical style and name. So, each publisher has different consideration of how much to charge. In monopolistic competition, we rouse see the following combination of characteristics among monopoly and perfectly matched market: 1. Many sellers: There are many loyals competing for the said(prenominal) 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 : immobiles can enter or e xit without any restriction. Thus, the number of firms adjusts until the stay firms obtain zero economic profit The Monopolistically competitive Firm in the Short effort In the short liberation, firms in monopolistically competitive market is like a monopoly. Because each firm offers different product so it follows downward sloping bless 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 passable to marginal cost and then uses the pick up curve to pick up 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 down the stairs 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, mark it on our website: OrderCustomPaper.com

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