Question

What are the differences among monopolistic competition, competitive markets, and monopoly?

 

Match each inequality or equality to the corresponding term for the monopolistic competitor operating at optimal, short-run production levels. 

Answer 1

What is Monopolistic Competition?

Monopolistic Competition= Mono (one)+Polistic competition (Competition)

The pure competition and pure monopoly are the opposite limiting cases. In between lies monopolistic competition. The distinguishing characteristic of monopolistic competition is that the products of various firms are are not homogeneous but differentiated though they are closely related related to each other. Concurrently, There is an element of competition also as many firms compete for selling their products

Price=Average Total Cost	Total Revenue is equal to total cost so there is zero economic profit.
Price>ATC	It means that firm is earning short run economic profit.
Price	It means firm is earning Short Run Economic Loss
Price> Marginal Revenue	It means firm has market power
Price>Marginal Cost	Mark up