# 404 Monopolistic Competition

Alright, we’re finally at the end of the chapter on Market Structures! Hang in there! It’ll be all over soon! After talking about monopolistic competition, we are just left with oligopoly and off we go to labor economics, general equilibrium, welfare economics! These are extremely interesting topics and I’m sure you will find much joy in learning them with me!

Monopolistic competition is one the more realistic market structures because we see them everyday! After watching the video, I suggest you go out there and attempt to classify firms under their respective market structures. Look at their products. Are they differentiated? If so, how different are they? Make a wild guess about the type of profits they are making too. Something I personally like doing is to think critically about their business and think of new ideas on how to capture a larger market share and increase profits. You should do it too! 🙂

At the end of the video, you should be able to:

• Understand demand curve dynamics when there is are new entrants or firms leaving a particular industry.
• Calculate monopolistic power.
• Identify short run and long run dynamics in a monopolistic competition market structure.

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1. bhawna says:

what are the inefficiency in the monopolist market ?

• Quickienomics says:

Hi Bhawna,

I read your email regarding the 2 questions you were having some difficulties with and the 2nd question is very similar to your doubt now. 🙂 You can find out more about market inefficiency here: http://about.quickienomics.com/?p=523

Hope that helps. 🙂

2. bhawna says:

thanks 😀

3. rev says:

sir ,
a monopolistic firms initial position is … that they start with earning supernormal profits ? or normal

• Quickienomics says:

4. rev says:

and what happens to quantity does it always increase when the firms enter or exit or thers a pattern ?

• Quickienomics says:

Depends on whether your MR=MC point changes

5. rev says:

okhay thanks !

6. rev says:

what does it means by demand being linear or non linear ?

• Quickienomics says:

Linear refers to a straight line and non-linear refers to a quadratic function which is an actual curve.

7. rev says:

an increase in lumpsum tax levied on firms in monopolistic competiotionwill never reduce the degree of monopolistic power . true or falls

in this questions, do we have to show only the change in the cost of the firm or change in the demand curve along with the explaination of monopolistic power ??

• Quickienomics says:

You have to show both.

8. Parag says:

Hey,
Isnt the monopolistic power denoted by P – MC/ P