Monopolistic Competition 3.4.3 Flashcards
1
Q
Define Monopolistic Competition
A
Many firms offering similar products with slight differentiation
2
Q
What are the 5 key features of Monopolistic Competition
A
Large Number of small firms
Low Barriers to entry/exit
Differentiated goods
Firms are profit maximisers
Compete on non-price factors
3
Q
In the long run monopolistic firms are
A
Allocatively inefficient
Productively inefficient
Dynamically inefficient
4
Q
In the short run firms in monopolistic competition make
A
Supernormal Profit
5
Q
In the long run firms in monopolistic competition make
A
Normal Profit
6
Q
Why are firms in monopolistic competition Allocatively and productively inefficient
A
Consumers demand differentiated goods and will pay higher than MC for choice and variety
