4.3- monopolistic competition

Question 1

Monopolistic competition

Answer 1

Combines a monopoly and competitive market structures

Question 2

Characteristics of monopolistic competition

Answer 2

Large number of buyers and sellers
Differentiated products
Some control over price
Low barriers of entry / exit
Non-price competition (ads)

Question 3

Features of a perfect competition in monopolistic competition

Answer 3

Large number of small firms
Easy entry / exit
0 supernormal profit LR due to easy entrance for other firms

Question 4

Features of a monopoly in monopolistic competition

Answer 4

Control over price due to differentiated goods
Demand is greater than marginal revenue
Not efficient

Question 5

Strengths of monopolist competition

Answer 5

Competition leads to no unfair pricing
Diversity of products created
More efficient than a monopoly

Question 6

Weaknesses of monopolistic competition

Answer 6

Brand loyalty means new firms may not be considered
Limited economies of scale
Lack of perfect knowledge from consumers / producers