Monopolistic Competition

Monopolistic Competition

1. Product differentiation

2. Many firms

3. No entry/exit costs in the long run

4. Independent decision making

5. Same degree of market power

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Company Profile

36,000 locations

In 100 countries

Serving over 69 million customers

80% of stores are independently owned


1. Set any price they want

a. When a new menu item is introduced they can charge whatever they want to example McRib no one else has that item

2. Improve product quality

a. Changed the type of grease they put their fries in to make them healthier

3. The company can decide who gets a discount and who doesn't

a. McDonald's gives a senior discount on coffee for people 55 and older


1. Profits go down when competitors enter the market

a. Burger King has the same products and that keeps prices down

2. There is a lack of barriers to competitors entering the market

a. Dairy Queen could enter the market and keep prices low

3. Can be wasteful, Liable of excess capacity

a. Boston Markets had to much capacity and wound up having to close stores

Monopolistic Competition- Short Run and Long Run- Micro 4.12