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Will its demand curve remain unchange when a firm in a monopolistic competition reaps great amounts of profits?
In monopolistic competition, a firm’s demand curve is typically downward sloping, reflecting the product differentiation that allows it to set prices above marginal cost. However, if a firm reaps significant profits, it may attract new entrants into the market, leading to increased competition. As a result, the demand curve for the firm may shift to the left over time as competitors offer similar products, ultimately reducing the firm's market power and profits. Thus, the demand curve is not static and can change in response to market dynamics.
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What are the key differences between monopolistic competition in the short run and long run?
In the short run, firms in monopolistic competition can make profits or losses due to varying demand and costs. In the long run, firms can only make normal profits as new firms enter the market, increasing competition.
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.
Why can a firm in monopolistic competition make an economic profit only in the short run?
A firm in monopolistic competition can make an economic profit only in the short run because in the long run, other firms can enter the market and offer similar products, increasing competition and driving down prices, which reduces the firm's ability to maintain high profits.
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.
What are the key differences between monopolistic competition in the short run and long run?
In the short run, firms in monopolistic competition can make profits or losses due to varying demand and costs. In the long run, firms can only make normal profits as new firms enter the market, increasing competition.
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.
Why can a firm in monopolistic competition make an economic profit only in the short run?
A firm in monopolistic competition can make an economic profit only in the short run because in the long run, other firms can enter the market and offer similar products, increasing competition and driving down prices, which reduces the firm's ability to maintain high profits.
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.
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.
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
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 do Firms trying to avoid competition?
Firms try to avoid competition so that they can set higher profits and earn greater profits.
Why would anyone want to enter a profitable industry knowing that profits would eventually be eliminated by competition?
It is not certain that anyone's profits will eventually be eliminated by competition; it is in the nature of competition that you have a chance of winning, as well as a chance of losing. And lots of people enjoy competition.
What is one component necessary for a market to work?
One essential component for a market to function effectively is competition. Competition among sellers encourages innovation, improves product quality, and helps keep prices in check, benefiting consumers. Additionally, a competitive environment fosters efficiency, as businesses strive to attract customers and maximize their profits. Without competition, markets can become monopolistic, leading to higher prices and reduced choices for consumers.
