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What is an example of monopolistic competition?

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Quick Answer

Some examples of monopolistic competition include restaurant chains and cereal brands. In monopolistic competition, many producers sell differentiated products that are not exactly alike.

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Full Answer

Many examples of monopolistic competition exist, such as food shops, coffee stores and pizza businesses. In monopolistic competition, products are non-homogeneous. Monopolistic competition firms act like monopolies in the short run, but the differentiation of products decreases with greater competition. Demand decreases and average total cost increases, resulting in zero economic profit. Depending on consumer rationality, monopolistic competition can lead to either perfect competition if benefits of differentiation decrease or the other extreme of natural monopoly.

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