Answer the following question
What are the features of monopolistic competition?
The following are the features of monopolistic competition:
i. Large number of buyers and sellers - There are a large number of buyers and sellers in a monopolistic market.
ii. Differentiated product - Products of a firm are slightly different from those of other firms, but they are close substitutes. Product differentiation is achieved through brand name, trade mark and advertisements.
iii. Selling cost - The need of the selling cost arises due to the sole aim of differentiating products. It is through the help of advertisements that a monopolistic firm tries to convince the consumers by distinguishing its product from its substitutes on qualitative basis.
iv. Free entry and exit of firms - There is no restriction on the entry and exit of firms in this form of market. But at certain times, due to some legal barriers and patent rights, it is not so free for the new firm to enter the market.
v. Imperfect Knowledge- Both the buyers and the sellers do not have complete knowledge about the prevailing market conditions. Due to product differentiation, it is very difficult to acquire complete knowledge about prices and quantities of different products.