"monopolistically" - 1 õppematerjal

Monopolistic competition

MR will lie below the Demand function (AR) Relaxing the characteristic of outputs from homogeneous to "differentiated products" was the basic change from the purely competitive market model. Thedifferentiation of output results in the demand faced by each seller being less than perfectly elastic. · Since there are "many sellers," many substitutes for each seller's output is implied. This suggests that the demand faced by a firm in a monopolistically competitive market is likely more elastic than in a monopoly. The elasticity obviously depends on the preferences and behavior of the buyers. The negative slope of a firm's demand function in imperfect competition results in a different result than in pure competition The conditions of entry and exit to and from a monopolistically competitive market are similar to the purely competitive market; there are no major BTE. · Entry and exit are relatively easy