... competition, as monopolistic competition has some characteristics from perfect competition and it would be easier to define and analyse it. Starting from the market, we see that a perfectly competitive market is one, which both buyers and sellers believe that their own buying or selling decisions have no effect on the market price. This means that every individual knows that his own quantities supplied or demanded are lightly relative to the market as a whole and so he acts having in mind that his actions have no effect on the market price. Moving from the market and looking to the firms, we see that firms in a perfectly competitive industry face a horizontal demand curve. It does not have any point how much the firm will sell. It will get the market price. If it wants to charge a price above Po, will sell no output because buyers will ...

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