monopolistic competition
Monopolistic competition is a type of imperfect competition such that many producers sell
products that are different from one another. The products aren’t complete substitutes because
they have different branding or quality. In monopolistic competition, a company or firm takes the
prices charged by its rivals as given and ignores the impact of its own prices on their competitors.
Characteristics
-Many producers and many customers, and no
business has total control over the market price.
-Few barriers to entry and exit.
-Produces have some control over price.
-Customers think there are non-price differences in
products.
Short-Run
Firm maximizes its profits where the average revenue (AR) is greater than the average cost (AC)
Long-Run
As more firms enter the market, a firm can no longer sell its goods above average cost and can no longer claim an economic profit.
4 iMagazine / October, 2014