Econ Discussion

1

1. Give examples of industries that are monopolistically competitive. Find the news articles, books which explain these examples.

There are certain characteristics that make companies monopolistically competitive. Some of these examples include easy entry into that particular industry, there are many sellers, products are not identical within the industry so there are differentiated products, and each company has a small market share. With that being said, that means that industries that would be examples of industries that are monopolistically competitive would be retail stores, restaurants like pizza and fast food, and barber shops. Some examples of how these companies differentiate themselves from others are design, color, distribution, quality services, training etc. Monopolistically competitive companies are attractive because of their supernormal profits in the short run.

Resources:

Bouman, J. (2015). Section 1: Characteristics of a Monopolistically Competitive Industry. Available: http://www.inflateyourmind.com/index.php?option=com_content&view=article&id=132&Itemid=163. Last accessed 16 Sep 2015.

UNK. (2015). Monopolistic competition. Available: http://www.economicsonline.co.uk/Business_economics/Monopolistic_competition.html. Last accessed 16th Sep 2015.

2

In a monopolistically competitive market, similar but not identical products are sold by a large number of firms. This is somewhat similar to perfect competition as sellers are not large enough to individually affect the market.

Product differentiation gives the sellers a minor control over prices but only in the short run. The physical or perceived difference(s) of the products make them highly substitutable resulting in demand being elastic.

Both markets have competition, sees entrance and exit re profits or losses, and equilibrium is at the point where Marginal revenue is equal to Marginal cost.

Clifton