Perfect Competition and Monopolistic Competition (Diagrams long-run)

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  • Created by: Hamza2971
  • Created on: 30-09-15 16:07

Perfect Competition and Monopolistic Competition (Diagrams long-run)

Similarities

  • Both diagrams show normal profit being made (AC=AR)
  • Both are profit maximisers (MC=MR)
  • Both subject to the law of diminishing marginal returns

Differences

  • Price is higher in monopolistic competition
  • Output is higher in perfect competition
  • Monopolistic competition is productively and allocatively inefficient
  • Revenue curves are different (Perfectly elastic in PC but downward sloping in monopolistic competition)

Overall comparison

Both diagrams produce at MC=MR and AC=AR

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