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Give an example of a real business under monopolistic competitive type of competition.
The answer of the following question is given below in a detailed manner as follows :
Monopolistic competition is a market structure that combines elements of monopoly and competitive markets. Essentially, a monopolistic competitive market is one with freedom of entry and exit, but companies can differentiate their products. Therefore, they have an inelastic demand curve and therefore can set prices. However, because there is freedom of entry, supernormal earnings will encourage more companies to enter the market, leading to normal earnings in the long run.
A monopolistic competitive industry has the following characteristics:
Many signatures.
Freedom of entry and exit.
Companies produce differentiated products.
Firms have an inelastic demand for prices; they are price creators because the good is very differentiated
Businesses make normal long-term profits, but could make short-term windfall profits.
Firms are ineffective in terms of allocation and productivity.
Some of the Examples of monopolistic competition are given below as follows :
Restaurants: Restaurants compete in both quality and price. Product differentiation is a key element of the business. There are relatively low barriers to entry to establishing a new restaurant.
Barber Shop. A service that will give companies a reputation for the quality of their haircut.
Clothing. Branded clothing is about brand and product differentiation.
Television programs: Globalization has increased the diversity of television programs on networks around the world. Consumers can choose between national channels but also imports from other countries and new services.