Monopolistic Competition - Admission/Application Essay Example

For example, physically differentiation can easily be made in case of consumer electronics. b) Marketing differentiation: where product differentiation is made by firms by different packaging, labeling and some other types of promotional techniques. For example, breakfast cereals are quite simply differentiated by way of making different packaging. c) Human capital differentiation: This is the type of differentiation where using the skills of the firm’s employees, the training which they have already received and given for firm and distinctive and different uniforms the firm make differentials of its products. d) Distribution differentiation: This type of differentiation includes distribution through mail order or through electronic commerce that is through internet shopping, such as sites like Amazon.

com by the help of which it differentiates itself from the common and traditional types of bookstores by making sales online. Super normal profits are possible in the short run but new firms are introduced into the markets as there are few barriers to the new market entry and also due to good knowledge and the opportunity to differentiate product (Krugman & Wells, 2012, p.45). At profit maximization, there is allocative inefficiency as far as both the long and short runs are concerned. The main reason for this is that in both the case the price remains more than the marginal cost.

As far as an economic model of competition is concerned, perfect competition is less realistic than monopolistic competition - many common place and familiar markets have a lot of characteristics of this type of