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    Monopolistic and Imperfect Competition Eco

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    jin
    This document discusses monopolistic competition. It defines monopolistic competition as a market structure with many sellers selling differentiated products and free entry and exit of firms. Key features include many buyers and sellers, firms that are price makers but compete through product differentiation and non-price factors like advertising. In the short run, firms can earn profits, losses, or normal profits, but in the long run, free entry and exit leads to normal profits as extra firms enter to eliminate super profits. Equilibrium under monopolistic competition is characterized by excess capacity as output is less than the minimum point on the average cost curve.

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    Monopolistic and Imperfect Competition Eco

    Uploaded by

    jin
    90 views9 pages
    This document discusses monopolistic competition. It defines monopolistic competition as a market structure with many sellers selling differentiated products and free entry and exit of firms. Key features include many buyers and sellers, firms that are price makers but compete through product differentiation and non-price factors like advertising. In the short run, firms can earn profits, losses, or normal profits, but in the long run, free entry and exit leads to normal profits as extra firms enter to eliminate super profits. Equilibrium under monopolistic competition is characterized by excess capacity as output is less than the minimum point on the average cost curve.

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    Monopolistic and Imperfect Competition eco

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    This document discusses monopolistic competition. It defines monopolistic competition as a market structure with many sellers selling differentiated products and free entry and exit of firms. Key features include many buyers and sellers, firms that are price makers but compete through product differentiation and non-price factors like advertising. In the short run, firms can earn profits, losses, or normal profits, but in the long run, free entry and exit leads to normal profits as extra firms enter to eliminate super profits. Equilibrium under monopolistic competition is characterized by excess capacity as output is less than the minimum point on the average cost curve.

    Copyright:

    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    90 views9 pages

    Monopolistic and Imperfect Competition Eco

    Uploaded by

    jin
    This document discusses monopolistic competition. It defines monopolistic competition as a market structure with many sellers selling differentiated products and free entry and exit of firms. Key features include many buyers and sellers, firms that are price makers but compete through product differentiation and non-price factors like advertising. In the short run, firms can earn profits, losses, or normal profits, but in the long run, free entry and exit leads to normal profits as extra firms enter to eliminate super profits. Equilibrium under monopolistic competition is characterized by excess capacity as output is less than the minimum point on the average cost curve.

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    © All Rights Reserved
    Download as PPTX, PDF, TXT or read online from Scribd
    Download as pptx, pdf, or txt
    of 9

    Economics-1

    BALLB-207

    Monopolistic and
    Imperfect
    Competition

    Ms. Lavi Vats


    Meaning of Monopolistic Competition
    • Monopolistic competition refers to a market structure in which there
    are many sellers selling similar but differentiated products and there
    is existence of free entry and free exit of firms.Consumer goods like
    toothpaste,bathing soaps,detergents,refrigerators etc.
    • “Monopolistic competition is a market structure in which there are
    many sellers of a commodity, but the product of each seller differs
    from that of the other sellers in one respect or the other.”
    Features of Monopolistic Competition
    • There are large number of buyers and many sellers.
    •  Firms under monopolistic competition are price makers. They set
    their own price.
    • Firms produce differentiated products. It is the key element of
    monopolistic competition.
    •  There is a free entry and exit of firms.
    •  Firms compete with each other by incurring selling cost or
    expenditure on sales promotion of their products.
    •  Non – price competition is an essential part of monopolistic
    competition.
    Equilibrium under Monopolistic Competition

    Short Run Analysis (Partial


    Equilibrium)

    A firm under monopolistic


    competition may earn
    profits,suffer losses or get only
    normal profit in the short run.
    Equilibrium under Monopolistic Competition

    Long Run Analysis (Group Equilibrium)


    In the short run a firm under monopolistic competition may earn
    super normal profit or incur loss. 
     
    But in the long run, the entry of the new firms in the industry will wipe out
    the super normal profit earned by the existing firms. The entry of new firms
    and exit of loss making firms will result in normal profit for the firms in the
    industry.
    Excess Capacity under Monopolistic Competition
    • The excess capacity refers to the difference
    between ideal(optimum) output and the
    output actually attained in the long run.
    • All firms have under monopolistic
    competition excess capacity in the long run
    equilibrium.
    • Here equilibrium output is less than the least A
    E
    cost output,since downward sloping curve
    can be tangential to tha U shaped LAC curve
    at some point to the left of minimum point. AR
    Evaluation of Monopolistic Competition

    • Interdependence
    • Naive Behaviour
    • Product differentiation and free entry
    • Waste on Advertisement
    • Group boundaries
    • Excess Capacity
    • Transport Waste
    Comparison of Monopolistic Competition and Perfect Competition

    • Product differentiation
    • Selling and Transportation cost
    • Concept of industry
    • Equilibrium HOMEWORK
    • Excess Capacity
    THANK
    YOU
    STAY HEALTHY STAY SAFE

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