Differences Between Monopoly And Monopolistic Competition

857 Words Apr 26th, 2016 4 Pages
2. Identity and explain the similarities and difference seen with Monopoly and Monopolistic Competition. Which of these forms of competition is more common? Why? A monopoly is a firm that can determine the market price of a good, and in extreme cases, a monopoly maybe the only seller of a good or service. For any amount of monopoly power to continue to exist in the long run, the market must be closed to entry in some way. This can be done in a legal way by asking people to obtain a license, patents, regulations, and taxes. Another way is just the cost of running a business in that industry that prevents people from entering. Additionally, sometimes a monopoly may just occur naturally when it is not profitable to have multiple firms in the same industry. Therefore, a natural monopoly arises when there are large economies of scale relative to the industry 's demand such that one firm can produce at a lower average cost that can be achieved by multiple firms. A Monopolistic Competition is when a market situation in which a large number of forms produce similar but not identical products, making it easier to enter the industry. Monopolist Competition does have a significant number of sellers in a highly competitive market, differential products, sales promotion and advertising, and easy entry of new firms to the industry. Monopolist Competition is more common as a result because of how easy it is to enter the market.
4. Pick two products that you believe are very elastic,…
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