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Monopolistic Competitors November 5, 2008

Posted by petrarcanomics in Imperfect Competitors.
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Monopolistic competitor is the next step from perfect competitor along the competitive spectrum, but its model is similar to the monopoly in that its marginal revenue separates itself and is steeper and below its demand curve. In the monopolostically competitive graph, the marginal revenue and demand curves are not quite as steep as they are in the monopoly model, but you sstill must find where MR=MC and go from there up to the demand curve to establish the profit maximization price.

Because of ease of entry, a monopolistic competitor cannot make an economic profit in the long run.

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