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In general monopolistically competitive firms earn profits where?
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Which statements is true about profits in a monopolistically competitive market?
many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term
Monopolistically competitive firms may not be able to produce goods at the lowest possible average cost. This statement is describing how monopolistically competitive firms might be?
without economies of scale
Monopolistically competitive firms are typically characterized by?
many firms selling products that are similar, but not identical.
Does monopolistically competitive firms have horizontal marginal cost curve?
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
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.
Which statements is true about profits in a monopolistically competitive market?
many firms will earn profits in the short term, but they must constantly innovate and compete to earn profits in the long term
Monopolistically competitive firms may not be able to produce goods at the lowest possible average cost. This statement is describing how monopolistically competitive firms might be?
without economies of scale
Monopolistically competitive firms are typically characterized by?
many firms selling products that are similar, but not identical.
Does monopolistically competitive firms have horizontal marginal cost curve?
No it does not. Only Perfectly Competitive firms have a horizontal Marginal Cost curve, which is also there demand curve.
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 must profits be zero in long-run competitive equilibrium?
The short answer: entry of new firms and exit of old ones. If profits are positive, new firms will enter the industry, piling in until they compete away all these profits. If long-term profits are negative, firms will exit until the price rises enough so that the firms who stay in the market can break even.
What is pure competitive?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero Economics profits.
What is a purely competitive industry?
Firms are price takers, price is equal to marginal costs, demand is perfectly elastic, i.e. constant and horizontal, the firms makes zero economics profits.
What are the examples of Monopolistic Competition?
Examples of monopolistic competition can be found in every high street. Monopolistically competitive firms are most common in industries where differentiation is possible, such as:The restaurant businessHotels and pubsGeneral specialist retailingConsumer services, such as hairdressing
What is nonprice competition?
Non-price competition refers to competition among firms that choose to distinguish their product via non-price means. EX: style, delivery, location, atmosphere, promotions, etc. Non-price competition is often used by firms that wish to differentiate between virtually identical products (dry-cleaners, food products, cigarettes, etc). Although any firm can use non-price competition, it is most common among monopolistically competitive firms. The reason for this is that firms which operate in the monopolistically competitive market are price takers, that is, they simply do not have enough market power to influence or change the price of their good. Consequently, in order to distinguish themselves, they must use non-price means.
Why do Firms trying to avoid competition?
Firms try to avoid competition so that they can set higher profits and earn greater profits.
What competitive environmental forces influence the firms strategy?
The competitive environmental forces influence the firms customers, rival firms, new entrants, substitutes, and supplies.
