Monopolistic competition

Figure 4 shows the short-run average costs (AC), marginal costs (MC), average revenue (AR) and marginal revenue (MR) curves for a typical firm in a monopolistically competitive market.

In the long run, market forces are most likely to cause the firm's revenue curves to

Explain why, in long-run equilibrium, monopolistically competitive markets are neither productively nor allocatively efficient.

Figure 7 shows the average revenue and marginal revenue (AR and MR) curves and the average cost and marginal cost (AC and MC) curves for a firm in monopolistic competition in the short run.

At the profit maximising price and output the firm will

Figure 2 shows the equilibrium position, point E, of a profit-maximising firm in a monopolistically competitive industry.

All other things being equal, which one of the following applies to the firm’s equilibrium at point E? The firm is

Explain how price and output are determined for a firm in a monopolistically competitive market, in both the short run and the long run.

Evaluate the view that government regulation of monopolistically competitive markets is unnecessary, and that polices to encourage competition and prevent the abuse of monopoly power should focus entirely on oligopolies and monopolies.