Monopolistic Competition

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Last updated 8:27 PM on 5/10/26
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5 Terms

1
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What is a monopolistically competitive market?

A market structure that combines elements of both monopoly and perfect competition

2
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7 characteristics of monopolistically competitive markets

  1. Many sellers

  2. Production differentiation

  3. Easy entry and exit

  4. Non Price competition

  5. Limited price control

  6. Short run and long run profits

  7. Imperfect information

3
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How does a monopolistically competitive firm maximises its profit in the short run?

Producing at MC = MR

4
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What 3 things do perfectly competitive markets have the flexibility to adjust in the long run?

  1. Product characteristics

  2. Prices

  3. Production levels

5
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What are the effects of competition in monopolistically competitive markets in the long run?

It erodes economic profits leading to where a firm earns no profit but continues operating as long as they cover their costs