A monopolistically competitive market

Question

Quizplus · Accepted Answer

A monopolistically competitive market has some degree of market power, which allows firms to differentiate their products and set prices, similar to a monopoly. However, there are also many competitors in the market, which makes it more competitive than a pure monopoly. Additionally, there are relatively low barriers to entry, so new firms can enter and compete with existing firms. Finally, economic profit is possible in the short run, but in the long run, firms will enter or exit the market until economic profit is driven to zero.

A Monopolistically Competitive Market