Explain five features of monopolistic competition. (10 marks)

Features of monopolistic competition

​Features of monopolistic competition include:

1. Many sellers and buyers.
   The market is comprised of many sellers and buyers who operate independently.
2. Free entry and exit into the market.
   There are no barters to entry into, or exit from the market.
3. Commodities sold are very close substitutes.
   Firms sell similar products but which are highly differentiated by names, shapes, colour, odour and packaging.
4. All firms earn normal profits in the long run.
   Some firms may earn super normal profits in the short run.
5. Firms are independent.
   There is little interdependence in terms of pricing and quantities to produce.
6. Entry or exit of a firm does not significantly affect the market.
   None of the firms can influence the market supply by joining or leaving the industry.
7. No single firm has control over the factors of production.
   All firms acquire the factors at the prevailing market rates and conditions.
8. Perfect knowledge of the market Buyers and sellers are aware of the prices, quantities and other market factors.

KPLC Workers at work in Kenya. KPLC is a monopoly.

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