![]() ![]() ![]() If this happens in the presence of a coercive government, monopolistic competition will fall into government-granted monopoly. ![]() In monopolistic competition, a company takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other companies. by branding or quality) and hence are not perfect substitutes. Monopolistic competition is a type of imperfect competition such that there are many producers competing against each other, but selling products that are differentiated from one another (e.g. The company no longer sells its goods above average cost and can no longer claim an economic profit. The company still produces where marginal cost and marginal revenue are equal however, the demand curve (MR and AR) has shifted as other companies entered the market and increased competition. Long-run equilibrium of the firm under monopolistic competition. A short-run monopolistic competition equilibrium graph has the same properties of a monopoly equilibrium graph. The difference between the company's average revenue and average cost, multiplied by the quantity sold (Qs), gives the total profit. The company is able to collect a price based on the average revenue (AR) curve. The company maximises its profits and produces a quantity where the company's marginal revenue (MR) is equal to its marginal cost (MC). Short-run equilibrium of the company under monopolistic competition. Imperfect competition of differentiated products that are not perfect substitutes ![]()
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