shift from monopolistic competition to perfect competition

Think about Chick-fil-A they are known for their customer service, making them different from other fast-food restaurants.Īnother example is Nike's signature swoosh logo, which can be recognized all around the world.

The firms use this in order to stand out and be easily recognizable and distinguishable from their competitors. Monopolistic competition uses brand names and packaging as a type of non-price competition. The chart below details which characteristics are similar to the other market structures.īoth allocatively and productively inefficient Firms experience ' excess capacity' in the long-run - these markets are productively inefficient! They do not produce where price = min ATCĬharacteristics Compared to Other Market StructuresĪs stated earlier, the market structure of monopolistic competition has characteristics that are like perfect competition, but also like monopolies.Firms are inefficient when left unregulated - like a monopoly, there will be deadweight loss both in the short run and long run because of.Non-price competition is used - because firms are differentiated, they can use non-price competition, such as advertising, to signal substitutes to other businesses (them!) to consumers.For example, every fast food restaurant sells the same general type of product (food, but fast!) but may have different products specifically (I don't get tacos at Burger King) Products sold are differentiated - each firm will sell a related, but different product.Firms break even in the long-run - as we'll see in more detail, in the long run, there is an adjustment in the market from which the market equilibrates to normal profits.means that firms can enter/leave easily) - like perfect competition, monopolistically competitive markets are easy to enter and leave Firms are ' price makers' - each of these firms have a degree of market power, so they are price makers.Many, various sized firms - unlike monopoly, a monopolistically competitive market has many firms.

Characteristics of Monopolistic Competition Some examples of monopolistic competition include fast-food restaurants, clothing companies, jewelers, hair salons, and furniture stores. This type of market structure has some characteristics that are the same or similar to perfect competition, as well as some characteristics that are the same or similar to monopolies. Monopolistic competition is an imperfect market structure where many, various sized firms compete for market demand shares.

Shift from monopolistic competition to perfect competition