In a perfectly competitive market, firms are price takers because no single firm can influence the market price. Products are identical, and there are no barriers to entry or exit.
In monopolistic competition, firms sell differentiated products, unlike perfect competition where products are identical. This differentiation gives firms some price-setting power.
In a monopoly, the marginal revenue curve lies below the demand curve because the firm must lower the price to sell additional units, reducing the marginal revenue of each unit.
A dominant strategy is the best choice for a player, no matter what the other players do. It is commonly analyzed in oligopoly settings using game theory.
In the long run, firms in monopolistic competition earn zero economic profit due to the entry of new firms, which erodes profits. However, they do not produce at minimum average total cost due to excess capacity.
