How does the long-run equilibrium for a monopolistically competitive market differ from the long-run equilibrium for a perfect
ly competitive market? One way in which monopolistically competitive markets and perfectly competitive markets differ is that in long-run equilibrium, monopolistically competitive firms
Following are the differences between monopolistically competetive market and perfectly competetive market.
Explanation:
Overall the profit ratio for the sellers is higher in monopolistically competitive market and low in a perfectively competitive market. In monopolistically competitive market, sellers charge a price higher than marginal cost, whereas, in a perfectly competitive market, the sellers charge a price equal to the marginal cost. In long-Run, the main difference between the competitive market and the monopolistic market is the excess capacity. It is the difference between the efficient level of output and profit-maximizing level of output.
Economies of Scale refer to the cost advantage experienced by a firm when it increases its level of output. The advantage arises due to the inverse relationship between per-unit fixed cost and the quantity produced. The greater the quantity of output produced, the lower the per-unit fixed cost.
