Examples of Monopolistic Competitive Market
Some of the most used examples include markets for restaurants, clothing, shoes, and service industries in large cities. Some of the main characteristics for this type of market situation is that there are many producers and many customers for the services/products, yet no company has control over the market price, consumers perceive that there are non-price differences among the competitors' products, and there are very few barriers to entry to and exit from the market. For example, a non-price competition is usually based on subtle product differentiation, like restaurants having a slightly different menus and orientations of their cuisine. Firms that are making profits in a monopolistic competition situation in the short run will break even in the long run, due to demand decreasing and average total cost increasing. In many markets that have these characteristics, the differentiation of products is often achieved by altering the physical composition of products, or through advertising to claim the superiority of the product, in markets for toothpastes or toilet papers, as examples. |