Monopolistic Competition | A-Level Economics Notes
These revision notes cover everything you need to know about Monopolistic Competition for A-Level Economics. They're designed for students studying AQA A-Level Economics, Edexcel A-Level Economics, and Edexcel International A-Level Economics. Written by Jaisul Naik, UCL Economics graduate and A-Level Economics tutor since 2017.
What are the characteristics of monopolistic competition?
- low barriers to entry and exit
- slight product differentiation
Monopolistic competition diagram in the short-run
Efficiencies in the short-run
- not productively efficient because MC≠AC at q1
- not allocatively efficient because AR≠MC at q1
What happens in monopolistic competition in the long-run?
- since existing firms are making supernormal profit
- and there are low barriers to entry,
- new firms enter the market
- market supply increases
- each firm's average revene curve shifts to the left as they have a smaller market share