monopolistic competition microeconomics

Monopolistic competition characteristics

many sellers, differentiated products, easy entry of new firms in the long run, advertisement, small market share by each firm, lack of collusion (when 2 businesses join and raise price), independence among firms

Differentiation

the distinguishing of products by brand name, color, and other minor differences

product differentiation and price

the firm has some control over its price, if it is more successful at differentiation, it can control the price more.

demand curve slope for monopolistic competition

downward sloping

sales promotion leads to

increased profits

advertising leads to

increased demand

how much advertising is enough

until mr = mc

Short run profit or no profit

profit can be positive, zero, or negative

Long run profit or no profit and why

always zero profits since so many firms produce substitutes that any economic profits will disappear with competition.