The difference between products in
Explanation of Solution
In perfect competition, trading takes place in homogeneous (identical) products, but in the monopolistic competition the trading tkes place in heterogeneous (differentiated) products. However, both the markets have large number of consumers and producers.
The difference can be in the form of branding and quality. The monopolistic firm shows the difference in its product with the help of advertisement because, if the buyer knows the difference, then he will be willing to pay more price for the same product which is sold by its competitors, whereas in perfect competition buyer knows that the products are homogenous, so they are willing to give the same price which prevails in the market.
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Chapter 14 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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