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The monopolistic firms have a downward sloping demand curve. P > MR; P > MC.
The demand curve is still above the MR curve as in the monopoly.
·Short Run
Identify the loss or profit.
Dynamic: The curve of demand may shift to reverse the profiting or losing situation.
·Long Run
There is a long run tendency for monopolistic competition to produce at zero or normal economic profits but not at minimum average total cost – the demand curve tangents the ATC curve at the producing point, which coincides with the level of optimal output(MR=MC).
Inefficient: underutilization or excess capacity.
●Oligopoly: The non-collusive kinked demand model
Interdependence of rival oligopolist.
Kinked demand oligopoly curve: rivals may base their strategies on the anticipated reactions of other firms.
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