Benefits of Monopolistic Competition
are following
Differentiation of
Products: Monopolistic competitive markets are signified by
differentiated products. As a result, consumers have more options
to chose from, unlike perfect competition that has homogenous
goods. Diversity enables consumers to achieve higher utility due to
increased choices.
Promotes Innovation:
Monopolistic competitive markets promote innovation, unlike perfect
competition where the existence of homogenous goods ensure that
firms don’t innovate. As firms can increase their profits by
introducing differentiated products, so they invest in new
products. Moreover, investment is also done in new production
processes to reduce the cost of production to increase market share
as firms in monopolistic competitive markets are not price
takers.