definition: many companies compete to sell similar but not identical products.
- 3rd type of market structure
- Its “monopolistic” in the sense that each company holds a monopoly over the its own design.
- They sell similar goods that can be substituted for one another but are not identical.
Firms that are monopolistically competitive must meet these four criteria:
1) Many firms – although there are several firms that can dominate the market, it is still easy to break into the market
2) Few barriers to entry – not many high barriers; patents are different enough to not protect companies' intellectual property.
3) Differentiated products – with firms capable of producing similar but not identical products, this means firms can produce at various quality and quantity.
4) Little control over price –Some firms can control price, but not too much as items can be substituted by another firm.
connected key terms:monopoly | differentiated products
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