The Advantages And Disadvantages Of Monopolistic Competition

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In this modern era, big firms are facing stiff competition as they come up with more and more products with their own special trademarks to distinguish themselves. Such competition is called monopolistic competition where all firms produce similar yet not perfectly substitutable products. There is no restriction as any firms are able to enter the industry as long as the profit generated is enough the cover the initial cost and earnings. Each firms have their own flair and attraction to stand its own ground it the market. Monopolistic competition differs from perfect competition as production cost is not as issue. Because of this, firms are usually left with excess production. (Investopedia, n.d.)
There are many characteristic of monopolistic competitions. One of such is that each firm makes independent decision regarding their product pricing and output based on the market and production cost. Each firm has the knowledge and ability to handle
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The advantages of monopolistic competition are that there are no significant barrier to entry therefore everything is contestable. The differentiation will create diversity, choice and utility making life more interesting. The market is more innovative with monopolistic competition with retailers coming up with more and more new ideas to attract customers.
The disadvantages however is that some differentiation does not create utility but generates unnecessary waste. Ideas that are thought of in short notice will not end up well in most cases. Firms are also allocatively and productively inefficient in a long and short run. (Investopedia, n.d.)
Take for example the competition between the 2 smartphone companies Oppo and Vivo. Both are relatively new in the market and is working their way up with their products that have their own special

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