Question

Monopolistic Competition & Oligopoly

Please elaborate on answer.

1. TRUE OR FALSE - A monopolistically competitive market is efficient in its long-run equilibrium because all firms in the market earn a zero economic profit.
2. TURE OR FALSE - Department stores are monopolistically competitive because stores differ in the amount of customer service they provide.
3. Why does entry into markets decrease firm profits?
4. Describe some of the ways in which firms differentiate their products.

Answer 1

a) False. even in the long run the monopolistic competitive market cause a dead weight loss in the market, they produce less and charge a higher price in the market.

b) True, they are monopolistically competitive because they differ in the amount of goods and services they are providing.

c) AN entry in to the market increase the supply of the product and at a higher product the price of the goods fall in the market, this reduce the profit that the firm had in the market.

d) Firms differentiate their product by advertisement, packaging, they have different shape, size and feature of the product which separate them from the other product in the market.