Monopolistic Competition Flashcards
1
Q
What is monopolistic competition (3)?
A
A market structure containing a large number of small firms, producing non-homogenous products, with no barriers to entry/exit.
2
Q
What is the point of normal profit?
A
When AC = AR
3
Q
What is the point of supernormal profit?
A
When AR > AC.
4
Q
What is the point of loss?
A
When AC > AR.
5
Q
What is the difference between the short and long run in monopolistic competition?
A
In the short-run, firms can make supernormal profits and losses, but in the long-run, they can only make normal profits.
