Monopolistic competition Flashcards
1
Q
What are two forms of imperfect competition?
A
- Monopolistic competition
- Oligopoly
2
Q
What are two ways products can be differentiated?
A
- Horizontal differentiation
- Vertical differentiation
3
Q
What is horizontal differentiation?
A
Quality is the same, depends on taste
4
Q
What is vertical differentiation?
A
When quality differs
5
Q
What are two assumptions of monopolistic competition?
A
- Sellers are price makers
- Entry is free
6
Q
What is the market structure of monopolistic competition?
A
- Many small sellers
- Low barriers to entry
- Differentiated products
7
Q
What happens to individual sellers demand (AR) curves when a new seller enters?
A
Their demand (AR) curve shifts left
8
Q
Where is the price in monopolistic competition?
A
Above MC
