MONOPOLISTIC COMPETITION

Question 1

MONOPOLSITIC COMPETITION CHARACTERISTICS

Answer 1

➳Some product differentiation
➳Some price maker power
➳More price elastic
➳No or low barriers to entry

Question 2

WHAT ARE COMPETITIVE MARKETS EFFICIENT IN?

Answer 2

In the long run:
➳Productively inefficient
➳Allocatively inefficient
➳

Question 3

PROFIT MAXIMISATION IN MONOPOLISTIC COMPETITION SHORT RUN

Answer 3

In the short run they are very much like a monopoly.
➳SNP can be made in the short run
➳Profit max at MC=MR

Question 4

PROFIT MAXIMISATION IN MONOPOLISTIC COMPETITION LONG RUN

Answer 4

In the long run it is similar to perfect competition.
➳Only normal profit can be made P=AC=AR
➳New entrants will join the market causing demand to be split therefore the demand curve shifts to the left