ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Low Barriers to Entry In monopolistic competition, one firm does not monopolize the market and multiple companies can enter the market and all can compete for a market share. Companies do not need to consider how their decisions influence competitors so each firm can operate without fear of raising competition.

Detailed explanation-2: -The disadvantages of monopolistic competition Some differentiation does not create utility, but rather generates unnecessary waste, such as excess packaging. Advertising can also be considered wasteful, although most of it is informative rather than persuasive.

Detailed explanation-3: -Firms use the differentiation to tell buyers why their product’s quality and price combination is better than their competitors. In Monopolistic Competition, a firm is not a price-taker and its demand curve has an inverse relationship with the price of the product.

Detailed explanation-4: -The advantage of monopolies is the assurance of a consistent supply of a commodity that is too expensive to provide in a competitive market. The disadvantages of monopolies include price-fixing, low-quality products, lack of incentive for innovation, and cost-push inflation.