Question

Compare Monopolistic Competition with perfect competition and explain which of the key policy variables are for a monopolistic competitor?

Answer 1

Monopolistic competition is a type of monopoly.under this,there are many number of marketers or producers selling a same product having a small difference.here selling cost is important . It refers to adds, sales exhibition,sales executive, free samples etc. Perfect competitive market is one in which there are large number of buyers and sellers engaged in buying and selling the same products under no artificial restrictions. Same price prevails in all the firms.there will be a perfect knowledge about the price and quality of the product to the buyer and seller. There will be free entry and exit for all firms . Ex: Fruits and vegetables. The basic difference between these two is price discrimination. According to Joan Robinson it the habit of monopolistic competitor of selling the same product produced under a single control to different buyers at different prices and different quantities of a same product at different prices. It is of three types based on paying capacity, use, and local.