At the end of this chapter, learners will be able to:
- Define demand and marginal revenue
- Describe profit maximization in the short run long run profits
- Compare perfect and monopolistic competition
- Discuss marketing differentiated products
We have now explored the two sides of the spectrum. In perfect competition, we assume identical products, and in a monopoly, we assume only one product is available.
Monopolistic competition lies in-between the spectrum. It involves many firms competing against each other, but selling products that are distinctive in some way.
Examples of monopolistic competition include stores that sell different styles of clothing, restaurants or grocery stores that sell different kinds of food and even products like golf balls or beer that may be at least somewhat similar but differ in public perception because of advertising and brand names. Firms producing such products must also compete with other styles, flavours and brand names. The term “monopolistic competition” captures this mixture of mini-monopoly and tough competition.
“8.4 Monopolistic Competition” in Principles of Microeconomics by Dr. Emma Hutchinson, University of Victoria is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.