Question

1. Under Monopolistic Competition, goods are no longer homogeneous. How does the monopolistically competitive equilibrium compare to the pure competition equilibrium?

Answer 1

Under the monopolistic competitive market the goods in the marke are not homogeneous that gives the firms more control over the price of the goods, and they produce at the point where the ATC is still sloping downward, due to all this the firms in the market are selling the goods at a higher price and lower level of output in the monopolistic competitive market.

Here, it is not allocative or productive efficient where as firms under perfect competitive is both allocative and productive efficient and sells the goods at a lower price and higher output