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[QUOTE="Min Eduok, post: 295526, member: 94713"] [HEADING=2]Consider this also. [/HEADING] Explain the disadvantages of monopolistic competitor Monopolistic competition is a type of market structure where many firms sell products that are similar but not identical. Some disadvantages of monopolistic competition include: [LIST=1] [*]Lack of incentive for firms to lower prices: Since firms have some control over the prices they charge, they may not have an incentive to lower prices to be more competitive. [*]Inefficient allocation of resources: Firms may engage in excessive advertising and other forms of non-productive activities in order to differentiate their products, leading to an inefficient allocation of resources. [*]Limited choices for consumers: While there may be many firms in a monopolistically competitive market, there may still be limited choices for consumers compared to a perfectly competitive market. [*]Unfair competition: Firms may engage in practices such as predatory pricing or creating barriers to entry to limit competition, which can be unfair to new firms trying to enter the market. [*]Reduced Consumer welfare: Monopolistic competition may lead to higher prices and reduced quality of goods and services, which can negatively impact consumer welfare. [/LIST] [LIST=1] [*]Lack of incentive for firms to lower prices: In a monopolistically competitive market, firms have some control over the prices they charge, as their products are differentiated from those of their competitors. This means that firms may not have a strong incentive to lower prices to be more competitive, as they can still sell their products at a higher price due to their unique features or branding. [*]Inefficient allocation of resources: Firms in a monopolistically competitive market may engage in excessive advertising and other forms of non-productive activities in order to differentiate their products and attract customers. This can lead to an inefficient allocation of resources, as firms are spending money on activities that do not directly contribute to the production of goods and services. [*]Limited choices for consumers: While there may be many firms in a monopolistically competitive market, there may still be limited choices for consumers compared to a perfectly competitive market. This is because firms are selling products that are similar but not identical, so consumers may not have as many options to choose from. [*]Unfair competition: Firms in a monopolistically competitive market may engage in practices such as predatory pricing or creating barriers to entry to limit competition. This can be unfair to new firms trying to enter the market, as they may not have the resources to compete with established firms. [*]Reduced Consumer welfare: Monopolistic competition may lead to higher prices and reduced quality of goods and services, which can negatively impact consumer welfare. As firms are focused on differentiating their products, they may be less inclined to focus on cost reduction and improving quality, which can result in higher prices for consumers and reduced quality of goods and services. [/LIST] [/QUOTE]
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