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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

List the three key attributes of monopolistic competition. • Draw and explain a diagram to show the long-run equilibrium in a monopolistically competitive market. How does this equilibrium differ from that in a perfectly competitive market?

To determine
The attributes of monopolistic competition and its long run equilibrium.

Explanation

The three main characteristics of monopolistic competition are as follows:

  1. 1. Many sellers: There are many firms competing with each other for the same customers.
  2. 2. Product differentiation: Each seller produces similar, but not identical products.
  3. 3. Free entry and exit: Firms can enter or exit the market without any restrictions.

Figure 1

Figure 1 illustrates the long-run equilibrium in a monopolistically competitive market...

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