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# Explain the difference between monopolistic competition in the short-run and the long-run
- URL: https://www.a-level-economics-tutor.com/explain-the-difference-between-monopolistic-competition-in-the-short-run-and-the-long-run/
- Published: 2026-09-23T15:31:54.000Z
- Updated: 2026-09-23T15:31:54.000Z
- Author: Jaisul Naik
- Tags: Model Paragraphs

Monopolistic competition consists of low barriers to entry, and there is slight product differentiation between firms. This means that most firms face a relatively elastic average revenue (AR) curve; if firms raise prices, quantity demanded is likely to fall by a larger proportion due to the number of close substitutes available to customers in the market. Firms aim to maximise profits, so they produce at the point where marginal costs = marginal revenue (MC=MR). This means that firms can make supernormal profit in the short run, as shown by the shaded rectangle op1c1q1\. 

![](https://storage.ghost.io/c/c4/66/c466eade-2ad5-4613-8010-7a8ffa8c352f/content/images/2026/09/image-18.png)

Since there are low barriers to entry, profit-maximising firms are able to enter the market quite easily. They are incentivised to do so because they know that existing firms are making profit in excess of normal profits, meaning firms are able to at least cover the cost and the opportunity cost of entering the market. As a result of new firms entering the market, market supply increases. Therefore, each firms’ average revenue falls as they have to accept a lower market price. This eventually leads to a new long-run profit maximising equilibrium where existing firms are only able to make normal profit.

![](https://storage.ghost.io/c/c4/66/c466eade-2ad5-4613-8010-7a8ffa8c352f/content/images/2026/09/image-19.png)

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