Capstone Papers-What is “monopolistic” about monopolistic competition? What is “competitive” about monopolistic competition

Capstone Papers-What is “monopolistic” about monopolistic competition? What is “competitive” about monopolistic competition

Because our main focus was on monopolistically competitive firms, and because they appear quite frequently in the economy, we will build upon what we learned in this week’s discussion. 

 

Please respond to two of the following questions. Be sure to identify which questions you are responding to in your initial post. 

What is “monopolistic” about monopolistic competition? What is “competitive” about monopolistic competition? Please explain.

 

2. Suppose that A Cleaner World invents a new type of laundry detergent that has an ingredient that stops stains from setting into clothes. If the laundry detergent market is monopolistically competitive, explain what will happen to the price of its product in the short run. What will happen in the long run? 

 

3. Explain the following statement “If the amount of product differentiation in a monopolistically competitive industry is very small, the outcome in that market will be similar to a perfectly competitive industry.” 

 

4. Can a monopolistically competitive firm earn large positive profits in the long run? Please explain.