Two economists independently but simultaneously developed the theory of imperfect competition in 1933. Who invented the theory of imperfect competition? The term “monopolistic competition” captures this mixture of mini-monopoly and tough competition, and the following Clear It Up feature introduces its derivation. However, firms producing such products must also compete with other styles and flavors and brand names. When products are distinctive, each firm has a mini-monopoly on its particular style or flavor or brand name. There are over 600,000 restaurants in the United States. Examples include stores that sell different styles of clothing restaurants or grocery stores that sell a variety of food and even products like golf balls or beer that may be at least somewhat similar but differ in public perception because of advertising and brand names. Monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way. Analyze how advertising can impact monopolistic competition.Discuss entry, exit, and efficiency as they pertain to monopolistic competition.Describe how a monopolistic competitor chooses price and quantity.Explain the significance of differentiated products.By the end of this section, you will be able to:
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