monopolistic competition Flashcards
1
Q
characteristics
A
low barriers to entry/exit
many buyers and sellers
price makers
non -price competition
differentiated goods - close subsitutes
2
Q
why do monopolistic firms only make SNP in the short run
A
new firms will enter the market due to a profit incentive
this will create more close substitutes for goods
demand will decrease for the firm
3
Q
Evaluate monopolistic competition in the long run
A
No allocative efficiency - consumers are exploited
No productive efficiency - not on the minimum point of AC
If established brands are present it may he hard for new firms to enter the market
