3.4.3

Question 1

What is monopolistic competition?

Answer 1

A form of imperfect competition it’s a middleground between monopoly and perfect competition and combines elements of each

Question 2

What does product differentiation mean?

Answer 2

That businesses have some control over their products, it implies that firms have some price-setting power

Question 3

What are the key assumptions of monopolistic competition?

Answer 3

-Many buyers and seller
-Perfect information
-Low barriers to entry/exit
-Products slightly differentiated
-Firms aim to maximise profit
-Consumers aim to maximise utility
-Firms have littlr price-making power