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  Monopolistic Competition and its Characteristics

Monopolistic Competition and its Characteristics

¨      Large number of sellers.

¨      Sell differentiated products with substitutes.

¨      Firms are allowed to enter and exit freely.

¨      Imperfect market conditions prevail.

AR (demand) and MR Curves of Monopolistic Competition

Firms in a monopolistic Competitive industry tend to have elastic downward sloping AR and MR Curves indicating that they have some control over price but not much.

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