Question

Features of Monopolistic Competition.

State three characteristics of monopolistic competition.

State any one feature of monopolistic competition.

Explain the features of monopolistic competition.

Give two features of monopolistic competition.

Explain any four features of monopolistic competition.

What are the main features of monopolistic competition?

Explain the characteristics of monopolistic competition.

Explain one feature of monopolistic competition.

Explain in detail the features of Monopolistic Competition.

Answer 1

1. Large number of sellers: There are many sellers or firms in a monopolistic competition. A single seller is not large enough to influence the market. Each one may, to a certain extent, follow an independent price and output policy without disturbing others.
2. Product Differentiation: Product is differentiated in monopolistic competition. Products differ from each other in many ways. Product differentiation can take place in the form of brand name and trademark. Products may be differentiated in terms of colour, size, design, taste, etc.
3. Close substitutes: Even though the products are differentiated, they are very close substitutes. For example, as far as brands are concerned, there are many close substitutes for products like soaps and garments. However, they are not perfect substitutes, as in perfect competition.
4. Selling cost: firms in a monopolistic competition promote sales by incurring selling costs. Selling cost includes all types of costs incurred to promote sales, such as costs usually incurred in the form of advertisements, exhibitions, gifts, free samples and so on.
5. Free entry and exit: Another important feature of monopolistic competition is the freedom of entry and exit of firms. A firm is free to enter the market to produce a substitute for the existing products. There exists freedom of entry and exit of firms in the market.
6. Price Maker: A firm in monopolistic competition is a price maker, but only to a limited degree.
7. Nature of demand curve: The demand curve for the products of each firm is downward sloping. This means that an individual firm can sell more by reducing the price.
8. Two-dimensional competitions: Under Monopolistic competition, the competition among the sellers takes place in two dimensions.
   • Price competition: Under Price competition, the firms compete with each other by lowering the price of the product to take advantage of higher sales.
   • Non Price competition: Under Non price competition, the firms compete with each other by making variations in the product or through selling costs. Through this, each seller tries to capture the market.