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1、MONOPOLISTICCOMPETITION:Amarketstructurecharacterizedbyalargenumberofsmallfirms,similarbutnotidenticalproductssoldbyallfirms,relativefreedomofentryintoandexitoutoftheindustry,andextensiveknowledgeofpricesandtechnology.Thisisoneoffourbasicmarketstructures.Theotherthr
2、eeareperfectcompetition,monopoly,andoligopoly.Monopolisticcompetitionapproximatesmostofthecharacteristicsofperfectcompetition,butfallsshortofreachingtheidealbenchmarkthatISperfectcompetition.Itisthebestapproximationofperfectcompetitionthattherealworldoffers.Monopoli
3、sticcompetitionisamarketstructurecharacterizedbyalargenumberofrelativelysmallfirms.Whilethegoodsproducedbythefirmsintheindustryaresimilar,slightdifferencesoftenexist.Assuch,firmsoperatinginmonopolisticcompetitionareextremelycompetitivebuteachhasasmalldegreeofmarketc
4、ontrol.Ineffect,monopolisticcompetitionissomethingofahybridbetweenperfectcompetitionandmonopoly.Comparabletoperfectcompetition,monopolisticcompetitioncontainsalargenumberofextremelycompetitivefirms.However,comparabletomonopoly,eachfirmhasmarketcontrolandfacesanegati
5、vely-slopeddemandcurve',500,400)">demandcurve.Therealworldiswidelypopulatedbymonopolisticcompetition.Perhapshalfoftheeconomy'stotalproductioncomesfrommonopolisticallycompetitivefirms.Thebestexamplesofmonopolisticcompetitioncomefromretailtrade,includingrestaurants,cl
6、othingstores,andconveniencestores.CharacteristicsThefourcharacteristicsofmonopolisticcompetitionare:(1)largenumberofsmallfirms,(2)similar,butnotidenticalproducts,(3)relativelygood,butnotperfectresourcemobility,and(4)extensive,butnotperfectknowledge.·LargeNumberofSma
7、llFirms:Amonopolisticallycompetitiveindustrycontainsalargenumberofsmallfirms,eachofwhichisrelativelysmallcomparedtotheoverallsizeofthemarket.Thisensuresthatallfirmsarerelativelycompetitivewithverylittlemarketcontroloverpriceorquantity.Inparticular,eachfirmhashundred
8、soreventhousandsofpotentialcompetitors.·SimilarProducts:Eachfirminamonopolisticallycompetitivemarketsellsasimilar,butnotabsolutelyidentica
