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Are you sure you want to Yes No. Juhi Domde , Student at Piet. No Downloads. Views Total views. Actions Shares. Embeds 0 No embeds. No notes for slide. Perfect Competition Many small firms, producing a homogeneous identical product, none of which having an impact on the price; each firm's product is non-distinguishable from other firms' product.
Difference Between Perfect Competition vs Monopolistic Competition
You just clipped your first slide! Clipping is a handy way to collect important slides you want to go back to later. Now customize the name of a clipboard to store your clips. Visibility Others can see my Clipboard. Another concern is that monopolistic competition fosters advertising and the creation of brand names. Advertising induces customers into spending more on products because of the name associated with them rather than because of rational factors. Defenders of advertising dispute this, arguing that brand names can represent a guarantee of quality and that advertising helps reduce the cost to consumers of weighing the tradeoffs of numerous competing brands.
Monopoly Production and Pricing Decisions and Profit Outcome | Boundless Economics
There are unique information and information processing costs associated with selecting a brand in a monopolistically competitive environment. In a monopoly market, the consumer is faced with a single brand, making information gathering relatively inexpensive. In a perfectly competitive industry, the consumer is faced with many brands, but because the brands are virtually identical information gathering is also relatively inexpensive. In a monopolistically competitive market, the consumer must collect and process information on a large number of different brands to be able to select the best of them.
In many cases, the cost of gathering information necessary to selecting the best brand can exceed the benefit of consuming the best brand instead of a randomly selected brand.
The result is that the consumer is confused. Some brands gain prestige value and can extract an additional price for that. Evidence suggests that consumers use information obtained from advertising not only to assess the single brand advertised, but also to infer the possible existence of brands that the consumer has, heretofore, not observed, as well as to infer consumer satisfaction with brands similar to the advertised brand. In many markets, such as toothpaste , soap , air conditioning , smartphones and toilet paper , producers practice product differentiation by altering the physical composition of products, using special packaging , or simply claiming to have superior products based on brand images or advertising.
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