Answer to Question #224607 in Economics of Enterprise for Cebo

Question

Describe the nature of the goods produced by a monopolistically competitive firm.

May i please have a more detailed explanation, the question is 15 marks.

Answer 1

For monopolistically competitive firm there are no barriers to entry. This means in long run the market becomes competitive with firms making normal profit.

For monopolistic competition all firms in the market produce differentiated goods and services. This makes the firms to be not the price takers. There is a perfectly elastic demand