Monopolistic Competition

Monopolistic Competition
Many firms selling Products that
are similar but not identical

Characteristics
Many firms: no individual firm can
influence the market price
Firms selling differentiated products
No barriers to entry.
Free Entry & Exit
Firms face a downward sloping demand
curve
3

Monopolistic Competitive
Markets
Restaurants
Grocery Shops
Confectionery stores
Furniture stores
Book stores

Monopolistic Competition lies between

extremes: Perfect Competition and Monopoly.
4

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The Short Run

MC

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6