Monopolistically Competitive Markets Have Two Main Sources of Inefficiency: Mark-Up

question 70

Essay

Monopolistically competitive markets have two main sources of inefficiency: mark-up over marginal cost, and externalities associated with entry of new firms. Explain how these inefficiencies can have an impact on total welfare

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Definitions:

Instrumental Aggression

Aggressive behavior that is intentional and planned, used as a means to achieve a specific goal, distinct from impulsive or emotional aggression.

Aggressor

An aggressor is an individual or country that initiates an attack, conflict, or hostile action towards another.

Reactive

Responding to events or stimuli rather than initiating actions proactively; typically characterized by responses to environmental or situational factors.

Proactive

Taking initiative by acting in advance of future situations, rather than just reacting.