Can a firm exercise monopoly under monopolistic competition explain
Answers
Under monopolistic competition there are large number of firms producing slightly differentiated products. Therefore some firms can exercise some power over price and output. Hence, the sellers behave as ‘price-makers’.
On the other hand a monopoly seller has total control over its price-output decision. Ina monopoly entry of new firms is prohibited but in monopolistic competition there are no barriers to entry and exit.
Therefore a monopoly cannot be exercised in monopolistic competition due to barriers of entry that monopoly has.
It is important to understand what is a monopolistic competition. When there are a great number of firms in which there is production of different types of products. So under such a situation, some firms have the ability to exercise some power in deciding the price and the level of output. Other firms are still allowed to enter.
- They make the price.
A monopoly is a little bit different. In this situation the seller has total or full and complete control over the price and the output. In a monopoly entry of new firms is not possible. Not allowed.
So, according to such a situation, a monopoly cannot be exercised in monopolistic competition because of different nature of entry issues.
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