Advantages (Merits) of Monopolistic competition
- Firms undertake product differentiation which enables consumers to enjoy a variety of products. This improves on their welfare due to a wide choice created.
- There is competition among firms which encourages efficiency in production. This leads to the production of high quality products.
- Because of many firms involved in production of differentiated products, there are no shortages of goods and services as in the case of monopoly. This is because even if one firm closes down, other firms can continue to produce goods and services.
- Creation of more employment opportunities. This is because there are many firms involved in production which increases the utilization of resources and thereby creating more employed opportunities.
- Through competition, research and innovations are possible. This is because each firm is aimed at increasing the quality of its product so as to compete favorably in the market.
- Source of revenue to the government through taxation of the abnormal profits earned in short run
CATEGORIES Economics
TAGS Dr. Bbosa Science
