Monopolistic Competition: Price, Non-Price, and Profitability of Firms

This assignment delves into the realm of monopolistic competition, examining the strategies employed by firms to gain a competitive edge. It distinguishes between price and non-price competition, highlighting how firms use pricing strategies, such as adjusting prices to meet demand, and non-pricing methods, like enhancing product services and quality, to attract customers. The assignment emphasizes the importance of understanding the demand curve and how firms operate within it. Furthermore, it explores how firms can achieve economic profits in the long run due to barriers to entry and how they maximize profits by equating marginal revenue and marginal cost. The assignment references relevant sources to support the analysis.

Natural Monopolies
Firms compete with each other through advertisement, by choosing the perfect location
and by selecting the perfect workers for them. In terms of price competition, the firms
compete each other in terms of price on which they sell the products. Such firms try to
engage their clients by selling the product at the lowest price. They also try to compete
by changing the prices regularly. This helps them to move along the demand curve. In
contrast to that, in non-price competition, firms try to sell products through other
methods, which do not involve prices. Firms enhance product services, quality services,
and their values which enhance the client loyalty.
The major difference is that the price competition accepts the demand curve and
change its prices, whereas, non-price competition wants to change the position and
outline of the demand curve.
However, firms are able to earn economics profit in the long run in monopolistic
competition because there are barriers to entry in the industry., and it becomes difficult
to enter the market. Moreover, a firm will maximize its profit, by manufacturing products
at the point where marginal revenue equal marginal cost (MR=MC).
Rittenberg, L., & Tregurtha, T. (2012). Monopoly. In Principles of microeconomics
(Version 2.0). https://saylordotorg.github.io/text_principles-of-microeconomics-v2.0/s13-
monopoly.html
UK essays (2017) Difference between price and non-price competition
https://www.ukessays.com/essays/economics/the-difference-between-price-and-non-
price-competition-economics-essay.php