Exam 4 Review Sheet filled out

Exam 4 Review Sheet filled out - What is monopolistic...

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What is monopolistic competition? This market structure combines features of monopoly and perfect competition. What are the main features of a monopolistically competitive market? All firms sell a different product (different brands of the same good). Free entry and free exit into the market. Many sellers. What are the similarities between monopolistic competition and perfect competition? What are the differences? Excess capacity – Markup - What happens under monopolistic competition in the short-run? Looks like a monopoly in the short run What happens under monopolistic competition in the long run? Looks like perfect competition in the long run Why do firms make zero economic profits in monopolistic competition in the long run? Because of free entry and free exit to and from the market. This causes the profits to trend to equilibrium. Why is there excess capacity in monopolistic competition in the long run?
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