Question
Explain the ‘free entry and exit of firms’ feature of monopolistic competition.
Solution
Feature of monopolistic competition:
Free entry and exit of firms:
Free entry and exit of firms under monopolistic competition define that firms are free to enter in or exit from the industry at any time according to their wish, that there is no restriction on entry or exit of old or new firms. This implies that there are neither abnormal profits nor any abnormal losses to a firm in the long run.this feature is important as all the firms are able to earn enough profit to continue their production. But entry under monopolistic competition is not so easy and free as the situation prevails under perfect competition.
