Monopolistic Competition

You are a broad traveler. Do you like music? Then your answer is an MP3 player which is a device that allows you to listen to your favorite music anytime and anywhere. When you are exhausted, you can not do the same thing as wearing a hood and listening to fresh music. This is when the MP3 player comes in handy. MP3 players have dominated the market in a huge way and the company will be ready to pay a considerable amount for some basket innovation and it will lead their company to go all the way .

There is monopolistic competition between monopolistic market and perfect competition. In monopolistic competition, there are many producers and consumers in the market, monopolistic monopolies dominate the market completely, whereas all companies have only a limited market power . Unlike monopolistic markets, monopolistic competition gives little barriers to entry. If they think that profits are sufficiently attractive, all companies can enter the market. This makes monopolistic competition similar to perfect competition.

A market that is not completely competitive is called monopolistic competition. There are many competitors in the monopolistic competitive market, but the products to be sold are not the same. For example, please look at US Mall in Minnesota, the largest shopping mall in the United States. In 2010, there are 24 stores selling women's prepsporte to the US mall, 50 stores selling men's and women's clothing, and 14 selling women's professional clothes There was a store. Most markets consumers encounter at the retail level have monopolistic competitiveness

As with monopolies, exclusive competitors also face the downward slope demand curve. However, unlike monopolies, monopolist companies can not benefit from long-term benefits. This is because the monopoly resembles perfect competition, so it is likely to attract new entrants (easy to enter) to zero profit in the long term because there is a possibility of raising profits. Let's look at the equilibrium price and output of short and long-term monopolistic competitors. Due to product differentiation, the demand curve DSR is inclined downward. The profit maximization amount QSR is MR = MC. Because the corresponding price PSR is greater than the average cost, the company profits as shown by the shaded rectangle in (a). However, in the long term, this profit will decline as the new company enters sales of similar products. After the new company enters, the original company will lose market share and its demand curve will decline.