If I were to open a business, I would choose the monopolistic competitive market.
Under monopolistic competition, with low barriers to entry and low capital requirements, firms are free to enter into or exit from the industry at any time. In addition, in monopolistic competition, large numbers of sellers offer closely related but not homogeneous products. This is the reason why each firm has a limited share of the market and has limited control over the market price. Thus, changes in one firmâs output have only a slight impact on market price or it also means that firms in monopolistic competition are price setters rather than price takers. In the short run, firms can make excess economic profits. However, as barriers to entry are low, other firms have an incentive to enter the market, increasing the competition, until overall economic profit is zero.
In order to yield the greatest profit, a firm engaged in monopolistic competition will focus on product quality, location, service, and advertising, since the major tool of competition is product differentiation. For example, if I opened a restaurant, the restaurant would have a menu with different dishes and different prices to other restaurants nearby and the prices of the dishes also would depend on its location, the food ingredients, the food quality, and the speed of service. With the purpose of gaining profit for the restaurant, I would try to be dynamically efficient, innovative and develop new ways to attract and retain local custom as well as maintain cost efficiency, which could keep the cost below the average profit.
I need a peer reply for this discussion and it should be 250 at least
If I were to open a business, I would choose the monopolistic competitive market.
Under monopolistic competition, with low barriers to entry and low capital requirements, firms are free to enter into or exit from the industry at any time. In addition, in monopolistic competition, large numbers of sellers offer closely related but not homogeneous products. This is the reason why each firm has a limited share of the market and has limited control over the market price. Thus, changes in one firmâs output have only a slight impact on market price or it also means that firms in monopolistic competition are price setters rather than price takers. In the short run, firms can make excess economic profits. However, as barriers to entry are low, other firms have an incentive to enter the market, increasing the competition, until overall economic profit is zero.
In order to yield the greatest profit, a firm engaged in monopolistic competition will focus on product quality, location, service, and advertising, since the major tool of competition is product differentiation. For example, if I opened a restaurant, the restaurant would have a menu with different dishes and different prices to other restaurants nearby and the prices of the dishes also would depend on its location, the food ingredients, the food quality, and the speed of service. With the purpose of gaining profit for the restaurant, I would try to be dynamically efficient, innovative and develop new ways to attract and retain local custom as well as maintain cost efficiency, which could keep the cost below the average profit.
I need a peer reply for this discussion and it should be 250 at least
Related textbook solutions
Related questions
21)
Compared to the results in a perfectly competitive market, a monopoly does which of the following?
|
It charges a higher price. |
|
|
It charges a price greater than the marginal cost. |
|
|
It produces less output. |
|
|
All of the above |
|
|
None of the above |
22)
"X-inefficiency" refers to the idea that
|
government restrictions on competition create a monopoly, which results in inefficiency. |
|
|
the cost of rent-seeking activity should be added to the welfare cost of monopoly. |
|
|
Generation X is less efficient due to a lack of competitive spirit. |
|
|
a lack of competitive pressure results in a monopoly not keeping its costs down to the lowest possible level. |
|
|
price discrimination results in inefficiently low cross-elasticities of demand. |
23)
Firms in which of the following market structures can engage in price discrimination?
|
monopoly |
|
|
oligopoly |
|
|
monopolistic competition |
|
|
All of the above |
|
|
None of the above |
24)
Monopolistic competition and perfect competition are in all of the following ways except
|
Barriers to entry are low in both |
|
|
There are many firms in both |
|
|
Firms in both produce the output level where MR=MC |
|
|
Nonprice competition is important in both |
25)
To get rid of excess capacity from the monopolistic competition in the long run, what would have to be given up?
|
Free entry and exit. |
|
|
economic rent |
|
|
resource allocative efficiency |
|
|
differentiated product |
|
|
productive efficiency |
