Define a monopolistic competition

Reference no: EM133466223

Assignment:

As a new start-up company, there is a ton of competition. Depending on what items are being sold, the value of the products can fluctuate heavily. Among the market structures that could offer the highest possible return, the best bet would be monopolistic competition. According to Benassy (1991),

Monopolistic competition is defined as a situation of imperfect competition with some important features:

(a) the products sold are differentiated;

(b) firms themselves set the price of these goods;

(c) the number of sellers is large, and each firm disregards the effects of its price decisions on the actions of its competitors;

(d) entry is unrestricted and proceeds until profits are reduced to zero or the smallest possible number consistent with the fact that the number of firms is an integer (para. 1).

There are many advantages to monopolistic competition, such as there are few barriers to entry, higher quality of products available, a very active business environment, the consumers being well informed about the products they are being offered, and there is a considerable amount of variety when it comes to the products the consumers are looking for. For a new business owner, this market structure is easy to enter; you can choose your prices, and the profits are higher.

Reference no: EM133466223

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