1. Conditions for monopolistic competitionThe following question asks you to analyze the monopolistically competitive market structure, which has some characteristics of both a monopoly anda competitive market.Complete the following table by selecting whether each of the listed attributes describes a competitive market, a monopolistically competitive market,both, or neither. Check all that apply.AttributesMarginal revenue is equal to priceFew sellersPrice takerProduct differentiationCompetitive MarketMonopolistically Competitive Market□

Perfect competition: A firm in the competitive market is a price taker because it has large number of seller and each selling identical product. Hence it faces horizontal demand curve. Hence its profit maximizing condition is: MR = MC = P.Monopolistic Competition: A firm in the monopolistic market have some control over price (although it has large number of sellers but it has differentiated product) which means it faces the downward sloping demand curve. Hence its profit maximizing condition is MR = MC {where P >= MR}.# Marginal Revenue equals market price - COMPETITIVE MARKETMonopolistic competition : A firm in the monopolistic market have some control over price which means it faces the downward sloping demand curve. Hence its profit maximizing condition is MR = MC {where P >= MR}Competitive market : A firm in the competitive market is a price taker. Hence it faces horizontal demand curve. Hence its profit maximizing condition is : MR = MC = P # Few Seller - NO OPTION Both the monopolistic market and the competitive market have large number of sellers. So no option of any given market will be chosen here. # Price taker - COMPETITIVE MARKET As a firm in monopolistic market have some control over price which means it faces the downward sloping demand curve. Hence they are not price takers. A firm in the competitive market is a price taker. # Product differentiation - MONOPOLISTIC MARKETA competitive market has a large number of firms having identical products. That is why they don't have any power to affect the price. Whereas a monopolistic market also have large number of sellers but each seller has different products (with respect to some attributes). Marginal Revenue equals market price - COMPETITIVE MARKETFew Seller - NO OPTION Price taker - COMPETITIVE MARKET Product differentiation - MONOPOLISTIC MARKET