Monopolistic Competition Flashcards
1
Q
What is Monopolistic competition
A
A market structure where many companies sell similar but differentiated products
2
Q
Price setting power
A
Price makers
3
Q
N firm ratio
A
Lower end
4
Q
Products
A
Differentiated goods
5
Q
Contestability
A
Low/Medium
6
Q
Barriers to entry
A
Low Barriers to entry
7
Q
Objectives
A
Profit maximisers in short run
8
Q
Efficiency
A
Dynamically efficient in short run
9
Q
Regulation
A
Low
10
Q
Societal impact
A
Creates a welfare loss so bad for society
11
Q
Examples
A
Takeaway industry
12
Q
What does Short run diagram look like
A
Normal MC,AC,AR,MR diagram
13
Q
What happens in Long run
A
Supply increases due to profit motives which leads to demand being more elastic as ore substitutes.
Normal Profit made
Price decreases
Shifts AR and MR inwards
