Monopolistic Competition is is a type of economy which has many sellers and sells similar item. Monopolistic Competition is is a type of economy which has many sellers and sells similar item. Monopolistic Competition is the part of Imperfect Competitive Market Monopolistic Competition is the part of Imperfect Competitive Market In Monopolistic Competition, In Monopolistic Competition, There are Many sellers There are Many sellers Enter freely and exit freely Enter freely and exit freely The goods are similar, not identical The goods are similar, not identical

The monopolistic competition compete for goods such as CDs, movies, computer games, restaurants; which are all items defended by the copyright. The monopolistic competition compete for goods such as CDs, movies, computer games, restaurants; which are all items defended by the copyright.

The Demand curve slopes down because Monopolistic Competition in not a price taker. The Demand curve slopes down because Monopolistic Competition in not a price taker. Free entry and exit exists, therefore the number of sellers and buyers will increase until profit becomes zero Free entry and exit exists, therefore the number of sellers and buyers will increase until profit becomes zero

In the Short Run of monopolistic market, the firms make profit, encouraging new firms to enter the market. In the Short Run of monopolistic market, the firms make profit, encouraging new firms to enter the market. Increases the market activity Increases the market activity Reduces demand Reduces demand

In the Monopolistic Competition’s short run, In the Monopolistic Competition’s short run, Decreases the number of items sold Decreases the number of items sold Increases Demand Increases Demand Increase Profit Increase Profit

In the Long Run, there are more than enough sellers, that the profit decreases to zero, In the Long Run, there are more than enough sellers, that the profit decreases to zero, -Marginal Revenue equals marginal cost -Demand curve makes revenue less than price -Price equals ATC

No excess capacity exists in perfect competition No excess capacity exists in perfect competition There is excess capacity in the monopolistic competition in the long run There is excess capacity in the monopolistic competition in the long run

Monopolistic competition does not fulfill the desires of the property of perfect competition Monopolistic competition does not fulfill the desires of the property of perfect competition It causes deadweight loss due to mark up pricing and Marginal cost It causes deadweight loss due to mark up pricing and Marginal cost Also monopolistic competition is inefficient because Firms maybe not ideal enough, or the number of firms may not be exact to the number needed Also monopolistic competition is inefficient because Firms maybe not ideal enough, or the number of firms may not be exact to the number needed

Product Variety Externality Product Variety Externality WHEN a consumer get surplus from purchase of a product the new firms in the market gives off a positive externality WHEN a consumer get surplus from purchase of a product the new firms in the market gives off a positive externality Business Stealing Externality Business Stealing Externality Because new firms enter the market, the original exisiting firms’ profit diminishes, eventually leading the market to zero profit Because new firms enter the market, the original exisiting firms’ profit diminishes, eventually leading the market to zero profit

When firms sell different products, they try to arouse incentives for them to buy their product. When firms sell different products, they try to arouse incentives for them to buy their product. One action they take in order to do this is making advertisement including in TV, Internet, magazine, etc…. One action they take in order to do this is making advertisement including in TV, Internet, magazine, etc….

Brand name causes consumers to see items, and perceive them differently. Brand name causes consumers to see items, and perceive them differently.