What is Monopolistic Competition Market and features ?

Hi, if you trying to know about "Monopolistic competition market" you are in the right place, every product must would have tagged with marketing in this world.  We must know what is the main markets in the marketing world.

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This is one of the main market structures in manufacturing and retail business.

In this market companies are making or selling the same products but with a small update of an item or make model differences.  In this competition market companies are entered freely and operate the business as individual and independent entire market perfect less competition.

There are three market structures in business.

  • Perfect Competition
  • Monopolistic Competition
  • Monopoly

What is Monopolistic Competition ?

This type of competition existed when one industry was manufacturing or selling similar products but models are being in change. these organizations have little ability to set shorten supply or raise costs to build benefits.

Manufactures or sellers in this competition normally attempt to separate their items to accomplish above market returns.  High level marketing is normal between these firms in this competition and a few financial experts scrutinize this as inefficient.

Competition product examples

  • Clothing manufacture
  • Foot wear manufacture
  • Restaurants
  • Mobile manufacture
  • PC manufacture
  • Television manufacture
  • Car manufacture etc...

FMCG products is the best example for this competition market products

Long-Run Monopolistic Competition

what is long run monopolistic competition

Long-Run equilibrium of the manufactures or sellers in this competition, the firm creating the production with marginal cost equals to marginal revenue.

If any other firm entered in the market and the previous firms will not do market with previous rates so selling products will reduce because of all the products converted to above average cost and will not gain profits in this Long-Run.

Short-Run Monopolistic Competition

what is short run monopolistic competition market structure

Short-Run equilibrium of the manufactures or sellers in this competition increases their profits and production as per Marginal Revenue is equals to Marginal Cost.

The manufactures or sellers cumulate the price based on Average Revenue, the only differentiation among the manufactures or seller’s Average Revenue and Average Cost multiply with selling quantity provides total profit.

Marginal Revenue (MR) = Marginal Cost (MC)

Distinguish between Monopolistic and Perfect competitions

Manufactures or Sellers make and sold differentiated items one upon competitive based on price volatile.  In this perfect competition demand could be in stabilize where the monopolistic competition demand will scope down with price volatile and long-runs.

The perfect competition makes and sold items which are not in models of differentiates or less differentiative or copyrighted products for example books, movies, food products etc., they do not need high level marketing for this type of competition.

Monopolistic Competition Inefficiencies

Where the maximization of profits at the point of equilibrium outputs level which means Marginal Revenue (MR) equal to Marginal Cost (MC) in this competition, which means the retailers from wholesale and consumers from retailers paying more than marginal revenue.

The operations of excess production in this type of competition, manufactures or sellers can not operate with minimization of Average Total Cost (ATC) in long-run business models.

Where long-run business models are squandering the money in advertising and marketing promotion they can use the money to reduce the production cost.

Where the manufactures or sellers cannot operate the excess production, it will cause people discourage and unemployment.

The structure of the market in this competition inefficiency as on allocation. Marginal cost is very less when compare with price in long-run.

This post will be updated in further days..

Thanking you..

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