Key Concepts

The three market structures introduced in this chapter are the key concepts to remember for CBSE Class 12 microeconomics revision:

• Monopoly — a market with exactly one seller of a commodity that has no substitute and whose industry is protected by barriers to entry. The firm faces the downward-sloping market demand curve (its $AR$ curve), with $MR$ lying below $AR$, and is in equilibrium where $MR = MC$ (with $MC$ rising); its positive profits persist in the long run.
• Monopolistic Competition — a market with a large number of firms and free entry and exit, selling differentiated (non-homogeneous) products. Each firm faces a downward-sloping demand curve and produces where $MR = MC$; in the short run output is lower and price higher than under perfect competition, and in the long run free entry and exit drive supernormal profit to zero. …