Monopolistic Competition Essay

987 Words 4 Pages
Are you an extensive traveller? Do you love music? Then your answer is a MP3 Player, a device that allows you to listen to your favorite music on the go. There is nothing like putting on the head set, laying back and listening to some refreshing music when you are exhausted. This is when a MP3 player comes in handy.
MP3 players have dominated the market in a huge way and companies would be ready to pay a handsome amount for some off the basket innovation that would lead their company all the way the top. Any company producing MP3 players faces one of the tightest competitions in the market.

In a monopolistic competitive market the product of different sellers are discerned on the basis of brands. Here the
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Due to the entry of mp3 player the physical audio players have been vanished from the market sector. The latest mp3 player features huge storage capacity with both audio and video optioned. The presence of famous companies like Apple, Sony, Samsung, Moser Baer, SanDisk, etc. mp3 players aggravates the competition. There is large number of independent firms in the monopolistic competition. Some companies like Apple, Sony, Philips, Transcend, iball etc. have been entering in to the market with identical product line and to the existence of large number of firms. The product would bear slight difference in style, color, display and texture. This smoothness the entry of competitive firms to the market.
The firms in monopolistically competitive industries might not earn economic profits in long runs; because economic profits attract competitors whose presence might eliminate profits here. In the long run firms in the monopolistic competition could not attain allocates efficiency because they are not operating where price equals marginal cost. Since the product is differentiated, there exists brands like Apple, Sony, Creative, SanDisk, because of their brand name and reputation they hold, these firms have some brand loyalty and the firm have some control over the price.
These branded companies had invested huge amount of money for the advertisement of their product because these advertisement of

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