monopolistic competition

Question 1

definition

Answer 1

Market structure with many firms selling differentiated products, with relatively low barriers to entry and exit. - similar to monopoly

Question 2

barriers to entry

Answer 2

economies of scale

vertical integration

brand (consumer) loyalty

control of key technologies

expertise, goodwill and reputation

Question 3

strategic entry detterancue examples

Answer 3

1. Hostile takeovers and acquisitions – i.e. taking a stake in a rival firm or buying it up completely!
2. Product differentiation through brand proliferation (i.e. developing new products and spending on marketing
   and advertising to reinforce brand loyalty).
3. Capacity expansions designed to achieve lower unit costs from exploiting internal economies of scale.
4. Predatory pricing: This happens when a dominant company sustains losses in the short run in the knowledge it
   can recoup them and raise prices if competition is forced to exit.