Monopolistic competition by Amelia Franzen

When Companies offer competing or have similar products, but they are not perfect substitutes.

afranzen5 — 2023-11-06 19:35:24 UTC

Characteristics

afranzen5 — 2023-11-06 19:44:17 UTC

presence of many companies
each company produces simular products but different products
companies are not price takers.
Free entry and exit the industry.
companies compete based off of products quality price and how its marketed.

What is a monopolistic competition (textbook)

pgritzma2_ — 2023-11-08 04:20:52 UTC

-includes many buyers and sellers

-firms have easy exit and entry into the market

Questions they ask include:

How much do we produce?

answer- the amount in which marginal revenue equals marginal cost

What price do we charge?

answer: the highest price in which they will sell their whole output

Disadvantages

pgritzma2_ — 2023-11-08 04:25:46 UTC

-the smallest differences can turn customers over to the other similar product in the market (packaging, prices,location, labels, advertising, delivery options)

-sellers may be forced to sell goods for the same price as similar products

Real World EX in a Monopolistic competition: 2 Hair Salons offering the same haircut service(the lower price or advertising will be the deciding factor for the customer)

Advantages

pgritzma2_ — 2023-11-08 04:25:55 UTC

-many choices/options for customers

Real World EX: If someone in Woodbury wants a cheeseburger they have 5+ options to choose from.

-easy entry and exit into this market

-products don't need to be unique or special, in fact products in this market are nearly identical

-less competition than other perfect competition markets

Real World EX: most consumers already have a preference over canes and chic fil a, so if the price were to raise slightly most customers would still opt and pay for their first choice

pgritzma2_ — 2023-11-08 18:40:57 UTC

pgritzma2_ — 2023-11-08 18:41:39 UTC

pgritzma2_ — 2023-11-08 19:05:54 UTC

pgritzma2_ — 2023-11-09 19:18:51 UTC