Marissa Serrano

ECON 2010
April 24, 2017
EPortfolio Assignment:
Monopolistic Competition

An imperfectly competitive market lies between a perfectly competitive market and a

monopoly. Monopolistic Competition is one example of an imperfectly competitive market. This
type of market competition encompasses a large number of competitors in the same industry
selling similar but differentiable products. Many people prefer this type of market because of the
variety of products and services offered.
There are a few ways that these competitors separate their products from the next firm.
One of these distinguishers is by the products physical features, this could be certain claims a
firm will make about its products. For example, a phone company that claims their phone screens
are shatterproof. Another distinguisher is a companys location or accessibility, also, perceptions
of a company or their products will help to set them apart from other competitors. Goods can
also be differentiated by their intangible characteristics; this can be as simple as a persons
perception of an items quality or the promise from a supplier about their items quality.
Advertising plays a big part in this type of differentiator. The downside to these differentiators in
this type of market is that if one firms recognizes the success of another firm, it is likely that they
will enter the same market.
As I stated before, monopolistic competition in the middle of a perfectly competitive
market and a monopoly. This is also reflected by its demand curve. While a perfectly competitive
markets demand curve is flat and a monopolys is a downward slope, the monopolistic demand
curve is again somewhere in between the two. This is because a monopolistic competition
markets demand is very elastic or receptive to price change.
A monopolistic competitive market does not demonstrate productive efficiency or
allocative efficiency. As far as being productively efficient, a perfectly competitive market is
ideal because firms are producing their products at the cheapest average cost. While the
monopolistic competitive market is producing goods that are more expensive than their marginal
costs. Due to price being higher than marginal cost, suppliers do not produce goods at their
capacity so a monopolistic competitive market does not reflect allocative efficiency.
 Reflection

It is important for economists to study the different types of markets, such as a

monopolistic competitive market, because we need to know how certain circumstances will
affect our economy. These circumstances vary from sellers and buyers to firms entering and
exiting a market and how these factors shift demand curves. If economists can recognize certain
patterns and trends maybe, we can eventually reach economic equilibrium. This type of market
also affects our daily life, for example, when we choose a restaurant or buy a phone. It is good
for people to be able to identify this type of market and understand that it allows us to make
choices based on our personal preferences.