Search results
Results From The WOW.Com Content Network
A monopolistically-competitive company might be said to be marginally inefficient because the company produces at an output where average total cost is not a minimum. A monopolistically competitive market is a productively inefficient market structure because marginal cost is less than price in the long run.
Unlike perfect competition where firms can freely enter and exit the market, it is not the case for monopolistic competition. For a monopoly to exist, there must be high barriers to entry for new firms. Barriers to entry must be strong enough to discourage potential competitors from entering.
Otherwise, other firms can produce substitutes to replace the monopoly firm's products, and a monopolistic firm cannot become the only supplier in the market. So consumers have no other choice. Economic barriers : Economic barriers include economies of scale , capital requirements, cost advantages, and technological superiority.
The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition, oligopoly, and pure monopoly. The main criteria by which one can distinguish between different market structures are: the number and size of firms and consumers in the market, the type of goods and services being traded ...
Monopolistic competition exists in-between monopoly and perfect competition, as it combines elements of both market structures. Within monopolistic competition market structures all firms have the same, relatively low degree of market power; they are all price makers, rather than price takers.
The main characteristics of monopolistic competition include: Differentiated products; Many sellers and buyers; Free entry and exit; Firms within this market structure are not price takers and compete based on product price, quality and through marketing efforts, setting individual prices for the unique differentiated products. [18]
The motivation behind the kink is that in an oligopolistic or monopolistic competitive market, firms will not raise their prices because even a small price increase will lose many customers. However, even a large price decrease will gain only a few customers because such an action will begin a price war with other firms.
Two different types of cost are important in microeconomics: marginal cost and fixed cost.The marginal cost is the cost to the company of serving one more customer. In an industry where a natural monopoly does not exist, the vast majority of industries, the marginal cost decreases with economies of scale, then increases as the company has growing pains (overworking its employees, bureaucracy ...