As we have
known, monopolistic competition is a market structure
between Perfect competition and Monopoly which has similarities with both. In
the long run, monopolistic firms only earn normal profit. This is due to the
existence of the other firms in the short run because there are no any barriers
to entry and exit.
Based on the article, the increased competition
results a negative scenario which consumers and firms’ profits have fallen.
This kind of scenario has been taking place by the buskers in the Centre of
Madrid. According to the research, specialist assumes other similar cases which
happened same kind of process could start even before other entrances of firms
occur. Hence, monopolistic firms are free to entry and exit in the market has
led to inhabit
competition and maintain normal profit in long run objective. Consequently, buskers’ profitable opportunities start to be
eroded away very quickly when they change their location.
Besides,
this example also illustrates those incumbents firms are able to adjust their
existing strategies also a factor that affect the situation started. In other
words, they are so called the price maker which has some influences over the
market price with their private policy.
In conclusion,
we could assume this market structure is involving large number of sellers and
behaving in an independent manner.
Entry by, Tan Yi Wei
How many kinds of profit do monopolistic competition firms do they earn in the short run and long run... ?
ReplyDeleteHello to you again, there is 3 types in the short run and 1 type in the long run. In short run there is normal profits/zero economics profit, supernormal profits and subnormal profits. For the long run there is only normal profits earn by firms or producers.
ReplyDeleteWhy there are existing 3 types of profits in the short run... ?
ReplyDeleteShort run is considered as a period of time over which one or more factors of production remains fixed.
ReplyDeleteIn the short run, a firm decides how much output to produce in the current facility.
For most firms, the capital, called the firm’s plant, is fixed in the short run.
Other resources used by the firm (such as labor, raw materials, and energy) can be changed in the short run.
Short-run decisions are easily reversed.
Therefore, it exists 3 types of profits in the short run
How to classify the concept of the short run and the long run specifically in the principles of economics ?
ReplyDeleteShort run (SR): a period of time over which one or more factors of production remains fixed.
ReplyDeleteIn the short run, a firm decides how much output to produce in the current facility.
For most firms, the capital, called the firm’s plant, is fixed in the short run.
Other resources used by the firm (such as labor, raw materials, and energy) can be changed in the short run.
Short-run decisions are easily reversed.
Long run (LR): a period of time long enough that a firm can change all factors of production.
In the long run, a firm decides what size and type of facility to build.
Long-run decisions are not easily reversed.
Firms can easily enter and exit.