Question

Understand the market behaviour of any selected firm in monopolistic competition. Recognize where the monopolistic competition

model is appropriate to us.

Answer 1

Restaurants are the best examples for monopolistic competition. Product differentiation is one of the most important feature of the monopolistic firms. Most of the restaurants were compete to produce different kind of foods at different prices in the market. There is full freedom of entry and exit that produce different kind of products. Each of the firms has the right to fix the price in the market. The quality of the products was competing in the market. General specialist retailing and hair dressing services were the other forms of monopolistic competitive markets in the economy. Each of the restaurants has their rights to determine and decide the price and quality of the goods and services they provide. The members in the markets have perfect knowledge about the market conditions. The diners have the facility to avail the menu form the restaurants in a town. After entering the restaurant they have the again the facility to review the menu. The consumers only provide there review after the completion of the dining.
There is super normal profit acquired by the firms in the long run. This will attract more entrants to the firm and shift the demand curve to left. There is a survival of new and small firms can be seen from the followers of this market structure. Most of the small firms in the real world say that this kind of market systems is good and perfect for the economy. Here the firms are never fully exploit their fixed factors because of the mass production difficulty. Thus the firms are productively inefficient in sense, both in short run and long run.