What is Monopolistic Competition?Monopolistic competition is a market structure where companies offer the same type of product or services. In a monopolistic market, there is a combination of a competitive market and elements of monopoly. We can, therefore, say that it is the mid between the competitive and monopoly elements. There is freedom of entry and exit in a monopolistic competitive market, and one firms decision does not affect that of its competitors. Show
Back To: BUSINESS LAW How does Monopolistic Competition Work?Most firms in a monopolistic market are similar but with a relatively low degree market power. It means that all of them are price makers, which makes the demand to be highly elastic, hence leading to high sensitive price changes. In monopolistic competition, there are positive economic profits, but in the short run. However, in the long run, it usually comes to zero. So, because of stiff competition, most firms engage in an intensive advertisement, so that they can be able to thrive in the market. Examples of Monopolistic CompetitionGenerally, the monopolistic competition involves competition with a number of industries that consumers familiarize with every day. You can find this in real-world markets. Good examples of such include the following:
Basically, differentiation of products is key when it comes to business. So, most restaurants competition always ranges from the quality of food, price as well as services. Also, there is free entry to this kind of business, meaning that there are low barriers when it comes to setting up a restaurant.
Hairdressing is also a good example of monopolistic competition. Salon and barbershop owners acquire a reputation based on the services they offer. Those with exceptional services usually build a good reputation, which attracts customers to their shops. Anyone is free to set up a hairdressing business because the business has low entry barriers.
Clothing is also another thing that people familiarize with during their day-to-day life. Product differentiation is also what makes this type of business to thrive in the clothing industry. For instance, designer label clothes thrive in the market because of the brand quality that makes it stand out from the rest.
Today we have many television programs ranging from local channels to international ones. People across the world are free to choose the programs they want to watch. For instance, Netflix provides consumers with a wide range of television programs from which they can choose from. Remember that content quality is what makes consumers prefer a certain channel over others. Characteristics of a Monopolistic CompetitionThere are four features of monopolistic competition. They include the following:
Monopolistic Competition AssumptionsThere are various assumptions when it comes to monopolistic competition. They include the following:
Limitation of monopolistic Competition
Back to: Business Transactions What market structure is identical products?Pure Competition
Products are identical to competitors' products, and there are no significant barriers to entering and exiting the market. The pure competition market structure is rare in the real world. This is a theoretical model that is helpful when looking at industries with similar characteristics.
What is oligopoly and monopoly?A monopoly is when a single company produces goods with no close substitute, while an oligopoly is when a small number of relatively large companies produce similar, but slightly different goods. In both cases, significant barriers to entry prevent other enterprises from competing.
What is an oligopoly market?Oligopoly markets are markets dominated by a small number of suppliers. They can be found in all countries and across a broad range of sectors. Some oligopoly markets are competitive, while others are significantly less so, or can at least appear that way.
Are oligopoly products identical?An oligopoly is a market condition in which the production of identical or similar products is concentrated in a few large firms. Examples of oligopolies in the United States include the steel, aluminum, automobile, gypsum, petroleum, tire, and beer industries.
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