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Chapter 26 Terms 102 - Monopolistic Competition A market...

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Monopolistic Competition: A market structure where a large number of firms produce similar but differentiated products, which they advertise and promote. There is relatively easy entry into the industry. Small Share of Market: When many firms exist in an industry each firm has a relatively small share of the total market. Lack of Collusion: With many firms it is difficult for them to get together to collude; that is, to agree to cooperate to set a pure monopoly price and output. Price rigging in a monopolistically competitive industry is virtually impossible. Independence: Because there are so many firms, each one acts independently of the others; no firm attempts to take into account all of its rival firms. Product Differentiation: Product differentiation is the distinguishing of products by brand name, color, minor attributes, and the like. Brand Names and Advertising: Because “differentness” has value to consumers, monopolistically competitive firms view their brand names as valuable. Firms advertise their brand to maintain differentiation of their products from those of
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