Monopolistic Competition Case Study
If they raise their prices, they will only lose a small amount of customers. A monopoly is a large enough business to influence its own price, such that it is the price setter rather than taker, unlike a perfectly competitive market where each firm faces a perfectly elastic demand curve. Wonks should start at the highest price possible. Wonks will begin to slowly lose sales. However a monopoly must lower price to increase output and sell it. Output will increase and be a lot more substantial than in a monopolistic competitive market. If a substantial amount of money is invested in inventory and it is not moving for some reason, the monopoly would lower prices as well. Fear of competition in a monopoly also works in the consumer’s favor by providing the consumer with improved products and better pricing. In a monopolistic competitive market, industries will produce as much as they can sell. When they have sold enough products to pay to produce more products, then they will start production again. Monopolistic competitive firms do not have the money to invest into inventory like monopolies do. If profit is greater than zero, businesses will enter, and each company's market share will fall because of more variety.