In an industry characterized by monopolistic competition, firms are free to enter the market because there are no barriers to entry, according to Economics Online. Firms are also free to exit the market.Know More
A barrier to entry is an obstacle that makes it difficult for a firm to enter an industry. Common barriers to entry include patents, government regulations and excessively high capital requirements. Industries with high barriers to entry include energy, pharmaceuticals and transportation.
In a monopolistically competitive environment, small entrepreneurs dominate and rely on differentiation to survive. Economics Online describes four types of differentiation: physical product, marketing, human capital and distribution. In physical product differentiation, firms use design, size, color, shape, performance and features to distinguish products from those of competitors. Marketing differentiation employs packaging and other promotional techniques. Human capital differentiation relies on disparate employee skills, training and other people-centered factors, while distribution employs different methods to get goods into the hands of consumers.
Because of the lack of barriers to entry, there are usually many firms in monopolistically competitive industries. As a result, they rely heavily on advertising, usually at the local level. According to Investopedia, these firms also have some degree of price control. They lack the freedom of monopolists to raise prices at will because consumers move to competitors, but they are freer than sellers of commodities in perfectly competitive markets.Learn more about Industries
Dr. Reed Fisher of Johnson State College lists the key characteristics of monopolistic competition as the number of firms in the market, the ease of access to the market and product differentiation. In monopolistic competition, there are many firms and entry into the market is free. Additionally, consumers can substitute products for each other, but they are not identical.Full Answer >
The four-firm concentration ratio for a given industry is the sum of the market share percentages of that industry’s four largest firms. In general, a concentration ratio measures the total output, in terms of market share, for a given number of firms at the top of a given industry.Full Answer >
One disadvantage of privately owned media is that private firms may place emphasis on profit, rather than media that serves public interest, according to Pew Research. Private media may also serve to stifle alternative points of view, offering homogenous content that does not depict the full range of perspectives surrounding current events.Full Answer >
Proponents of globalization argue that it is economically stimulating, encouraging not only the free play of market forces but entrepreneurship and innovation as well. Alternatively, detractors state that globalization has worsened conditions for many workers around the world and exacerbated pre-existing social and political inequalities in certain regions.Full Answer >