Consider the monopolistically competitive market structure, which has some features of a competitive market and some...

Consider the monopolistically competitive market structure, which has some features of a competitive market and some features of a monopoly. Complete the following table by indicating if each attribute characterizes a competitive market, a monopolistically competitive market, both, or neither. Check all that apply. Attributes Competitive Market Monopolistically Competitive Market Price is equal to marginal revenue Product differentiation Many sellers Zero profit in the long run

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There are similarities and difference between the monopolistic and perfectly competitive firms, in a perfectly competitive market there are large number of buyers and sellers and while in monopolistic competition there there are many firms and large number of buyers. The monpolistically competitive firms produce differentiated products and the perfectly competitive firms produce identical goods. The monopolistic competitive firm is a price maker and while the perfectly competitive firm is a price taker, since the perfectly competitive firm is a price taker the market price is also equal to the marginal and the average revenue(P=AR=MR). The similarity between the two is , the both firms are able to earn positive positive in the short run and in the long they only earn normal or zero economic profit. This means the price is equal to the average total cost in the long run for both the markets.

Rahul Sunny answered 1 year ago

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