3.4.3 Monopolistic Competition Flashcards
1
Q
Monopolistic Competition Characteristics
A
Many small Firms
Low barriers to Entry/Exit
Products are slightly Differentiated
Low degree of market Power
2
Q
Monopolistic Competition Market Power and Price Influence
A
The firm has market power, acts as a price maker as they offer a differentiated and desirable product
3
Q
Why do firms in Monopolistic Competition make Super-normal Profit in the SR but not in the LR
A
Firms will make SNP in the SR until new firms enter the market due to low barriers to entry and will copy products
4
Q
Why do firms in Monopolistic Competition have Product Differentiation Strategies?
A
In order to stand out
