1.  meaning of monopolistic competition
 characteristics of monopolistic competition
 Examples, advantages & disadvantages
 Graphing
 We Are..

2. - Many firms sell products that are similar but not identical.
- Products that are differentiated from one another as good
but not perfect substitutes

3. 1.Product Differentiation
•
Goods sold are close substitutes but not perfect
substitutes
•
Goods satisfies the same basic wants or need.
•
Physical differences (size, design, color, shape)
•
Perceived differences (packaging, brand names)
•
Support services
(presentations, ‘gimiks’, advertisement)

4. 2. Many Firms
•
Many firms in each MC product group (collection
of similar products) and many firms on the sidelines
prepared to enter the market.
3. Free Entry and Exit (Long run)
•
Low start up cost, no sunk cost and no exit costs.
•
Free to enter and exit industry.
4. Independent decision Making
•
gives no consideration to what effect its decision
may have on competitors.

5. 5. Market Power
•
firm has control over the terms and conditions of
exchange. (price)
6. Imperfect Information
•
Buyers and sellers do not know everything, but they
have relatively information alternative
prices, differences, brand names etc.

6. Clothing


Toothpaste

Restaurant

Stationery



Farmers
Soap
Chocolate

7. •
no significant barriers to entry.
•
differentiation creates diversity, choice and utility.
•
Unnecessary wastes (packaging, advertising)

8. Market
#s of Type of
Produ Product
-cers
Control
over Price
Conditions Examples
of entry
Pure
Competition
Large
Virtually
identical
None
Very easy
Agricultural
Products
Monopolistic
Competition
Many
Differentiated
Limited
Easy
Retail trade,
food, gasoline,
fashion
Oligopoly
Few
Standardized/
differentiated
Limited /
wide
Hard
Appliances,
cigars, cars,
computers
Pure
monopoly
One
Unique
Wide
Blocked
Government,
franchise,
utilities

9. MC= Marginal
cost
MR= Marginal
revenue
ATC= Average
total cost

10. MC= Marginal
cost
MR= Marginal
revenue
ATC= Average
total cost