Firm tightening of monopolistic (imperfect)
competition should clarify short-term and long-term
equilibrium.
Answers
Answer:
Monopolistic competition is a type of imperfect competition such that many producers sell products that are differentiated from one another.
LEARNING OBJECTIVES
Evaluate the characteristics and outcomes of markets with imperfect competition
KEY TAKEAWAYS
Key Points
Monopolistic competition is different from a monopoly. A monopoly exists when a person or entity is the exclusive supplier of a good or service in a market.
Markets that have monopolistic competition are inefficient for two reasons. First, at its optimum output the firm charges a price that exceeds marginal costs. The second source of inefficiency is the fact that these firms operate with excess capacity.
Monopolistic competitive markets have highly differentiated products; have many firms providing the good or service; firms can freely enter and exits in the long-run; firms can make decisions independently; there is some degree of market power; and buyers and sellers have imperfect information.
Key Terms
monopoly: A market where one company is the sole supplier.
Monopolistic competition: A type of imperfect competition such that one or two producers sell products that are differentiated from one another as goods but