Pure Competition vs. Monopolistic Competition
Identifying Characteristics
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| Producers unknown to buyer | Producers "brand" products |
| Products identical | Products distinctive, or "differentiated" |
| Buyers all pay the same price | Buyers may pay different prices |
| Firms ignore each others' prices and products | Firms watch each others' prices and products |
| Industry establishes quality standards | Firms claim differences in quality |
| Advertising to promote product or industry | Advertising to promote individual brand |
| Advertising paid by industry groups | Advertising paid by individual firms |
| Firm strategy: produce strandard product at lowest cost | Firm strategy: get an edge over rivals, find market niche |
| Firms aim to sell as much as they can until MC = P | Firms care about market share as well as price |
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| New firms enter market easily and often | Entry difficult; few new firms entered recently |
| Most firms just earn cost of capital | Most firms make excess or "economic" profits |