market entry and monopolistic petition
Monopolistic competition -- a market served by many firms selling slightly different products
product differentiation -- a strategy monopolistic firms used to distinguish their products from their competitors
In a monopolistically competitive market, entry continues into each firm and the market makes zero economic profit. Firms can differentiate their products by picking a distinct physical design, level of service, location, or product or aura.
As firms enter a market, the market price drops and the average cost of production increases because each firm produces less output over which to spread its fixed costs.
In a monopolistically competitive market, firms compete for customers by producing differentiated products.
And the long-run equilibrium with monopolistic competition, price equals average cost and economic profit is zero.
Business administration and marketing class notes - these notes are taken using voice recognition software and may have grammar errors.
