2 Excess CapacityUnder monopolistic

2 Excess Capacity
Under monopolistic competition, firms produce on the downward-sloping portion of their average cost curves, which contrasts with perfect competition. In the long-run, firms in perfectly competitive market produces in the efficient scale, as shown in Figure 9.4 (b). Perfectly competitive firms produce in the lowest average cost. Whereas firms in monopolistically competitive firms have excess capacity because it can increase production quantity for lower average cost.
3.3 Markup over Marginal Cost
Firms in monopolistic competition has their market power from differentiated product, as evident in Figure 9.4 (a) showing that price exceeds marginal cost. Quantity of production of firms in competitive market is larger because firms in the market do not have market power and choose the production quantity at an efficient level.

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2 Excess Capacity
Under monopolistic Competition, firms Downward-sloping portion of the Produce on their average cost curves, which contrasts with Perfect Competition. In the long-run, firms in perfectly competitive market produces in the efficient scale, as shown in Figure 9.4 (b). Perfectly competitive firms produce in the lowest average cost. Whereas firms in Monopolistically competitive firms have excess capacity because it Can increase Production Quantity for Lower average cost.
3.3 Markup over Marginal Cost
Firms in monopolistic Competition has their Market Power from differentiated product, as evident in Figure 9.4 (a) showing that Price Exceeds marginal. cost. Quantity of production of firms in competitive market is larger because firms in the market do not have market power and choose the production quantity at an efficient level.