What Is The Role Of Selling Costs In Monopolistic Competition?


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The products have relatively higher average cost of production and sell the products at a high price due to the differentiation. The firms maximize their profits in the short term due to these high selling prices.

In monopolistic competition, the average production cost is high and the firm is not able to produce at the lowest possible cost. The firms that sell the product maximize their profits in the short run because they are selling a differentiated product and they sell them at higher prices. However, this profit would not be greater in the log run because the demand will decrease due to more differentiation by other firms and the average cost of production would be higher and the profits lower, hence causing a break even for the firm.

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