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Why are natural monopolies a barrier to entry?

Once a natural monopoly has been established, there will be high barriers to entry for other firms because of the large initial cost and because it would be difficult for the entrant to capture a large enough part of the market to achieve the same low costs as the monopolist. Examples of natural monopolies are water and electricity services.

What is the difference between monopolistic competition and perfect competition?

In monopolistic competition there are no barriers to entry. Therefore in long run, the market will be competitive, with firms making normal profit. Key difference with perfect competition In Monopolistic competition, firms do produce differentiated products, therefore, they are not price takers (perfectly elastic demand).

What is a monopolistic competitive industry?

A monopolistic competitive industry has the following features: Many firms. Freedom of entry and exit. Firms produce differentiated products. Firms are allocatively and productively inefficient. In the short run, the diagram for monopolistic competition is the same as for a monopoly. The firm maximises profit where MR=MC.

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