i. Define a monopolistically competitive market. Give two examples of this market structure.
ii. Explain two important features of this type of market. State one similarity and one difference between monopolistic competition and perfect competition.
ii. Explain two important features of this type of market. State one similarity and one difference between monopolistic competition and perfect competition.
Monopolistic market is a kind of market in which there are
more number of buyers and sellers sell more or less closely related goods.
Examples include different soaps whose function is more or
less same in the same way toothpastes are considered. Each producer has a
monopoly control over his own product but competition exists between them.
Thus, we find a combination of monopoly and competitive elements.
- Two features of
monopolistic market:
Non price competition:
this is nothing but the competition is not by price but by producing
differentiated products.
Free entry and exit: There is freedom of entry in
the sense that the new firms are free to produce close substitutes of any brand
of product.
- Two dissimilarities
between perfect and Monopolistic competition:
In perfect competition
goods are similar where as in monopolistic competition they are not.
No money is spent for
promotions in perfect competition whereas significant promotions are seen in
monopolistic competition.
- Two similarities between
Perfect and Monopolistic competition:
Large number of buyers
and perfect mobility of factors of production is seen in both.
Monopolistic market is a kind of market in which there are more number of buyers and sellers sell more or less closely related goods.
Examples include different soaps whose function is more or less same in the same way toothpastes are considered. Each producer has a monopoly control over his own product but competition exists between them. Thus, we find a combination of monopoly and competitive elements.
- Two features of
monopolistic market:
Non price competition: this is nothing but the competition is not by price but by producing differentiated products.
Free entry and exit: There is freedom of entry in the sense that the new firms are free to produce close substitutes of any brand of product.
- Two dissimilarities
between perfect and Monopolistic competition:
In perfect competition goods are similar where as in monopolistic competition they are not.
No money is spent for promotions in perfect competition whereas significant promotions are seen in monopolistic competition.
- Two similarities between
Perfect and Monopolistic competition:
Large number of buyers and perfect mobility of factors of production is seen in both.
