1. Excess Capacity Show Competitive firms: free entry leads to firms producing at the point where ATC is minimized (MC = ATC), which is the efficient scale of the firm. Monopolistic Competition: excess capacity, output is less than the efficient scale of perfect competition. 2. Mark-up Over Marginal Cost The mark-up is the distance from the price to the MC when the quantity produced is where MC=MR. The excess capacity is the distance from the quantity produced to the efficient scale. Recommended textbook solutions
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Why is monopolistic competition similar to perfect competition?In contrast, whereas a monopolist in a monopolistic market has total control of the market, monopolistic competition offers very few barriers to entry. All firms are able to enter into a market if they feel the profits are attractive enough. This makes monopolistic competition similar to perfect competition.
What is the similarity between perfect competition and monopolistic competition quizlet?One major similarity between perfect competition and monopolistic competition is that: the firms just break even in the long run.
How is monopolistic competition similar and different from perfect competition?In monopolistic competition, every firm offers products at its own price. In perfect competition, the demand and supply forces determine the price for the whole industry and every firm sells its product at that price. Entry and Exit are comparatively easy in perfect competition than in monopolistic competition.
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