Economics and Statistics

Monopolistic Competition: It is a market structure that has similarities with both perfect competition and monopoly. Similarities with perfect competition: There are multiple firms competing against each other. One common example is fast food chain restaurants. Low barriers to entry. Therefore a firm can easily enter a monopolistic competitive market.    In the short run, firms can earn an economic profit. In the long run, the economic profit attracts other firms up until the economic profit disappear.  Similarities with monopoly: Monopolistic competitive firms have the ability to set a price for their products, though changing prices affects quantity sold proportionally more than for a monopolist. Each firm faces a downward-sloping demand curve due to their pricing power, but it is more elastic (i.e flatter) than for a monopolist. Since each firm faces a downward-sloping demand, the marginal revenue is less than demand.   Unique features: In order to earn an ec...