Hi, if you trying to know about the “Monopolistic competition market” you are in the right place, every product must have tagged with marketing in this world. We must know what is the main markets in the marketing world.
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 competitive 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
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.
Manufacturers 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
- Footwear manufacture
- Mobile manufacture
- PC manufacture
- Television manufacture
- Car manufacture etc…
FMCG products are the best example of this competition market products
Long-Run Monopolistic Competition
Long-Run equilibrium of the manufacturers 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
The short-run equilibrium of the manufacturers or sellers in this competition increases their profits and production as Marginal Revenue is equal to Marginal Cost.
The manufacturers or sellers cumulate the price based on Average Revenue, the only differentiation between the manufacturers’ or seller’s Average Revenue and Average Cost multiplied by selling quantity provides total profit.
Marginal Revenue (MR) = Marginal Cost (MC)
Distinguish between Monopolistic and Perfect competitions
Manufacturers or Sellers make and sold differentiated items one upon competitive based on price volatility. In this perfect competition, demand could be in stabilizing where the monopolistic competition demand will scope down with price volatility and long runs.
The perfect competition makes and sold items that 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) is equal to Marginal Cost (MC) in this competition, which means the retailers from wholesale and consumers from retailers pay more than marginal revenue.
The operations of excess production in this type of competition, manufacturers 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.
When the manufacturers or sellers cannot operate the excess production, it will cause people discourage and unemployed.
The structure of the market in this competition inefficiency as on allocation. Marginal cost is very less when compare with price in the long run.
This post will be updated in further days.