Question

1.1- Identify any five examples of industries operating under conditions of monopolistic
competition and outline any of their salient features to justify your selection.
1.2- Explain, with the aid of a graph, the short run equilibrium position of a firm
operating in the monopolistic competitive market structure”.

Answer 1

Some of the industries operating under monopolistic competition are restaurants businesses, cereal , clothing, shoes, and service industries in cities. This is because these businesses involve large numbers of buyers and sellers.

The graph above indicates the short-run equilibrium of the firm under monopolistic competition. The firm uses its profits to the maximum and produces a quantity where the firm's marginal revenue (MR) equals the marginal cost (MC). The firm is able toget a stable price using the average revenue (AR) curve. The difference between the firm's average revenue and average cost, multiplied by the quantity sold out (Qs), gives the total profit