by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How does Monopolistic Competition Affect Efficiency? The long-term result of entry and exit in a perfectly competitive market is that all firms end up selling at the price level determined by the lowest point on the average cost curve. This outcome is why perfect...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Monopolistic Competitors Affect Market Entry? If one monopolistic competitor earns positive economic profits, other firms will be tempted to enter the market. The entry of other firms into the same general market shifts the demand curve that a monopolistically...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
How do Monopolistic Competitors Choose Price and Quantity? The monopolistically competitive firm decides on its profit-maximizing quantity and price in much the same way as a monopolist. A monopolistic competitor, like a monopolist, faces a downward-sloping demand...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
What is Perceived Demand for a Monopolistic Competitor? A monopolistically competitive firm perceives a demand for its goods that is an intermediate case between monopoly and competition. The demand curve that a perfectly competitive firm faces is perfectly elastic or...
by TheBusinessProfessor | Feb 23, 2025 | Economic Analysis & Monetary Policy
Why is a Monopoly Inefficient? Most people criticize monopolies because they charge too high a price, but what economists object to is that monopolies do not supply enough output to be allocatively efficient. To understand why a monopoly is inefficient, it is useful...
