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In a monopolistic competition profits well in excess of costs are unlikely because?
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Supernormal profit of monopolistic competition?
In the short run, abnormal profits exist but in the long run, it gets eroded away because new firms enter the industry.
When monopolistic competition is compared to perfect competition what can you generally expect with reguard to price output and profit?
We can expect that prices are higher, output is less, and profits are high er.
What is the difference between oligo polistic competition and pure monopolistic competition?
In monopolistic competition, firms capture monopoly profits through specialisation of their product, making it non-substitutable with competing firms' products. In oligopolistic competition, this does not occur. Instead, three are three general outcomes: 1) firms collude to mimic a monopoly and share monopoly profits; 2) a dominant firm leads the market and sets the price; 3) firms compete freely and but take each other's decisions into account.
What is an monopolistic?
Monopolistic competition is a market situation that is different from both perfect competition (PC) and monopoly. The theory of monopolistic competition was first developed by Chamberlin. In monopolistic competition the firms sell differentiated yet highly substitutable products, whereas in PC, the firms engage in production of homogeneous products. This product differentiation gives the firms a bit of monopoly power in pricing and they face slightly downward sloping demand curve as compared to the horizontal demand curve of PC. However, the free entry and exit of firms ensures that these firms have limited monopoly and no super normal profits arise in the long-run.
Compare monopoly and monopolistic competition?
A monopoly is a market which has only one firm, the firm has market power, and there are barriers to entry. The long run profits for a monopolist may be greater than zero. Monopolistic competition is more closely related to perfect competition than monopoly. In monopolistic competition, there are many firms in the market. However, each firm has product differentiation. An example of monopolistic competition would be the jeans industry. There are many different types/quality of jeans e.g. True Religion, Levi's and Lee's. Products are somewhat differentiated, but, as in perfect competition, the long run profit = 0. Oligopoly is a market in which there are only a few firms, each firm has market power, and there is much product differentiation between the firms. The long-run profit of oligopoly can be greater than zero, because there are barriers to entry in the market.
Supernormal profit of monopolistic competition?
In the short run, abnormal profits exist but in the long run, it gets eroded away because new firms enter the industry.
When monopolistic competition is compared to perfect competition what can you generally expect with reguard to price output and profit?
We can expect that prices are higher, output is less, and profits are high er.
What is the difference between oligo polistic competition and pure monopolistic competition?
In monopolistic competition, firms capture monopoly profits through specialisation of their product, making it non-substitutable with competing firms' products. In oligopolistic competition, this does not occur. Instead, three are three general outcomes: 1) firms collude to mimic a monopoly and share monopoly profits; 2) a dominant firm leads the market and sets the price; 3) firms compete freely and but take each other's decisions into account.
What is an monopolistic?
Monopolistic competition is a market situation that is different from both perfect competition (PC) and monopoly. The theory of monopolistic competition was first developed by Chamberlin. In monopolistic competition the firms sell differentiated yet highly substitutable products, whereas in PC, the firms engage in production of homogeneous products. This product differentiation gives the firms a bit of monopoly power in pricing and they face slightly downward sloping demand curve as compared to the horizontal demand curve of PC. However, the free entry and exit of firms ensures that these firms have limited monopoly and no super normal profits arise in the long-run.
In monopolist competition profits well in excess of costs are unlikely because?
established rivals and new firms would lure customers away with slightly different and/or cheaper products
Compare monopoly and monopolistic competition?
A monopoly is a market which has only one firm, the firm has market power, and there are barriers to entry. The long run profits for a monopolist may be greater than zero. Monopolistic competition is more closely related to perfect competition than monopoly. In monopolistic competition, there are many firms in the market. However, each firm has product differentiation. An example of monopolistic competition would be the jeans industry. There are many different types/quality of jeans e.g. True Religion, Levi's and Lee's. Products are somewhat differentiated, but, as in perfect competition, the long run profit = 0. Oligopoly is a market in which there are only a few firms, each firm has market power, and there is much product differentiation between the firms. The long-run profit of oligopoly can be greater than zero, because there are barriers to entry in the market.
Why monopolistic competition in the short run making profit but in long run it would be break even?
In the short run a monopolistic firm can charge where MR=MC and that will be at a price that gains abnormal profits. They can do this in the short run because firms have a lag before they can be set up. But in the long run, the abnormal profits draw new firms into the industry and so this forces the firm to break even. Any profit at all- in theory- will draw in competitiors as there are limited barriers to entry.
How are a monopolistic firm and a competitive firm similar?
Monopoly means that there are no competitor for your product or servises
Why do Firms trying to avoid competition?
Firms try to avoid competition so that they can set higher profits and earn greater profits.
Why is it that firms can earn profits in the long run in monopoly and oligopoly but not in monopolistic competition and perfect competition?
Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.
Why aren't entrepreneurs likely to earn large profits from their businesses over many years?
Because of the recession, overhead, and competition.
Is it true Monopolistic markets and their high prices and profits violate capitalist justice because the seller charges more than the goods are worth so the prices the buyer must pay are unjust?
True
