6. What are the assumptions of the theory of
Different forms of market is operated in the market like perfect competition, monopolistic, monopoly, oligopoly, etc. all these markets have different structure which is followed by them to produce the goods and services in the market.
Assumptions of monopolistic competition:
Large number of sellers and buyers: The monopolistic competition have a large number of buyers and sellers which produce the goods and services in the market.
Independent: Monopolistic firms are independent of controls from any other firms or industries.
Freedom of entry: In case of monopolistic competition, the firms can enter or exit the industry as per its choice.
The assumptions of monopolistic firm are different from perfect competition as in case of monopolistic competition the firms can choose the prices of product according to the will whereas in case of perfect competition the industry decides the price and each firm has to agree on that price. The situation of perfect competition is more of unrealistic and is highly based on hypothetical assumptions whereas the monopolistic is real concept.
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