1. Find three examples of monopolistic competition (four firm concentration rati

Question

1. Find three examples of monopolistic competition (four firm concentration ratios of 20 to 40 percent) at www.census.gov/epcd/www/concentration.html. Which characteristic of monopolistic competition described in the text are true for each example?

2. “In the long-run, there is no difference between monopolistic competition and perfect competition.” Discuss this statement with respect to the following:

a) The price charged to consumers

b) The average total cost of production

c) The typical firm’s profit in the long run.

Explanation / Answer

1. footwear 2. soap, cleaning compound . 3.dairy products   

soap, cleaning compound is the best example

2.In the long run there is no difference between monopolistic competition and perfect competition because in the long run consumers are sensitive to price. As Demand curves in monopolistic competition are not perfectly elastic: due to the market power that firms have, they are able to raise prices without losing all of their customers.but in case of perfect competition Firm's individual demand curves in perfectly competitive markets are perfectly elastic, which means that an incremental increase in price will cause demand for a product to vanish

AVERAGE TOTAL COST OF PRODUCTION -In the long run monopolistic competition does not produce at the minimum of ATC it produces at the point where ATC is tangent to demand curve that is why it is productively effecient but perfect competition always produce at the minimum of ATC thatswhy it is productively effecient

PROFIT- The firm will earn zero economic profit in both perfect and monopolistic competition

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