Market Basics
These are three real-world examples of industries that operate under monopolistic competition.
What are shoes, clothing, and pizza?
This type of competition involves using a lower cost to attract customers.
What is price competition?
: In the short run, a firm might earn economic profit, also known by this name.
What is abnormal profit?
Profit is always maximized at the point where Marginal Revenue (MR) equals this.
MC
What national holiday in Mexico has picnickers munching chocolate coffins and sugar skulls?
Day of the dead
This term describes the number of firms typically found in a monopolistically competitive market.
What is a large number?
This form of competition uses methods other than price to attract customers.
: What is non-price competition?
If firms in the market are earning abnormal profits, this will happen in the long run.
What is the entry of new firms (new entrants)?
Allocative efficiency is achieved only when Price (P) is equal to this.
What is Marginal Cost (MC)?
What nation's military attached dynamite packs to Dobermans before sending them into Palestinian guerrilla hideouts?
israel
This is the level of barriers to entry for new firms wanting to join the market.
What is none (or no barriers)?
This is the primary method firms use for non-price competition.
What is product differentiation?
When new competitors enter the market, the demand for an existing firm's product will do this.
What is decrease?
In monopolistic competition, Price is greater than Marginal Cost (P>MC), leading to this
What is allocative inefficiency?
What Great Lake state has more shoreline than the entire U.S. Atlantic seaboard?
Michigan
This key characteristic involves making a product stand out from those of its competitors.
What is product differentiation?
These are the three specific ways mentioned in the sources that a firm can differentiate its product.
What are R&D (Research and Development), advertising, and branding?
This is the specific type of profit all firms earn when the market reaches long-run equilibrium.
What is normal profit?
Because it is not efficient, monopolistic competition is technically considered a form of this.
What is market failure?
If you had Lafite-Rothschild on your dinner table, what would it be?
wine
Because there are many substitutes, the demand curve in this market is relatively more of this compared to a monopoly.
What is elastic?
A firm has less market power than a monopoly because its customers have access to many of these.
What are substitutes?
If firms are making a loss, they will eventually do this, causing demand for the remaining firms to increase.
What is exit the market?
This is the primary consumer benefit that justifies the lack of efficiency in this market structure.
What is product variety?
Who averaged one patent for every three weeks of his life?
thomas edison