Explain whether or not a firm in monopolistic competition earning abnormal profits is productively and allocatively efficient. A monopolistic competitive industry is made up of a fairly large number of firms. In relation to the size of the Industry‚ monopolistic competitive firms are small. They produce slightly differentiated products‚ for example by brand name‚ color‚ design and quality of service. A firm in monopolistic competition has a downward sloping demand curve‚ since they are (extended)
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that his brand-loyal customers are not going to leave him. This is possible only because the products have no perfect substitutes. Since however all the brands are of close substitutes to one another‚ the seller will lose some of his customers to his competitors. Thus the market is a mix of monopolistic competition. There are three main features that distinguish between a perfect competition and monopoly market structure: the type of firm‚ the freedom of entry and the nature of the product (Sloman
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Perfect Competition‚ Monopoly‚ Monopolistic Competition and Oligopoly Introduction Market can be defined as an area where buyers and sellers meet and come in contact with each other by any means of communication in order to get information‚ exchange of various goods and services and are interested to do business. From this definition we may be traced out following four essentials which market has: 1. The existence of good which is dealt with. 2. The existence of buyer and seller. 3. The existence
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Eleven monopolistic competition and oligopoly CHAPTER OVERVIEW Pure competition and pure monopoly are the exceptions‚ not the rule‚ in the U.S. economy. In this chapter‚ the two market structures that fall between the extremes are discussed. Monopolistic competition contains a considerable amount of competition mixed with a small dose of monopoly power. Oligopoly‚ in contrast‚ implies a blend of greater monopoly power and less competition. First‚ monopolistic competition is defined‚ listing
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Can perfect competition achieved by Electronic Commerce? Introduction Information and knowledge have emerged as most important sources of wealth in the recent years (Kehal & Singh 2005‚ p.vii). There is a computer-based technology storm and it has impact and influence on the global market‚ education and government. More and more people are using the personal computers and Internet‚ and it has becoming as a fundamental tool to our daily lives. We all directly or indirectly involved in the variety
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One of the key determinates to a successful national economy is the structure of its markets. The main market structures are: 1. Monopoly 2. Oligopoly 3. Perfect Competition 4. Monopolistic Competition Each of these market structures have unique characteristics‚ and can be classified according to three factors. The degree of competition‚ the first factor‚ is important as it classifies markets into different market structures. It compares the relative sizes of firms‚ the amount of sellers (vendors)
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in the world‚ 1792 to 1750 B.C). In Marxian Economics‚ monopoly means someone who controls the price‚ commodity circulation and funds to cash with strong financial resources. American economists’ E. H. Chamberlain (The Theory of Monopolistic Competition‚ Harvard University Press‚ 1969) said： “The causes of the monopoly are the government’s special permission‚ technology and key resource monopoly and natural monopoly.” The first type means the government gave the exclusive rights to a corporation
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is my chosen firm in a perfectly competitive market. I think this is a good example. It sells bananas to supermarkets and food suppliers‚ who resell on to customers. The next two paragraphs explain the features of perfect competition‚ then a monopoly. “The theory of perfect competition illustrates an extreme form of capitalism.” (Sloman‚ 2007:113) There are many suppliers‚ who all only supply and produce a small fraction of the total output‚ of the whole industry. None of the firms have any power
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1.0 Introduction: The spectrum of competition ranges from perfectly competitive markets where there are many sellers who are price takers to a pure monopoly where one single supplier dominates an industry and sets price. We start our analysis of market structures by looking at perfect competition. Firms operate within their market‚ which consists of: Supply side: all of the firms producing similar products Demand side: all buyers willing to purchase the products Markets differ; the
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kinds of market structures in this economy. Perfect competition‚ as one of them‚ is often described as the ideal market structure‚ and only treated as a theoretical ideal. If we compare the perfect competition market with other types of market structure‚ such as monopoly‚ monopolistic competition‚ and oligopoly‚ it will be obvious that the perfect competition is ideal mainly due to the presence of productive and allocative efficiency. In perfect competition‚ there are a large number of small firms
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