hey how you doing econ students this is Mr Clifford welcome to ACDC econ right now we're going to talk about monopolistic competition like the name suggests monopolis competition is kind of like a monopoly but it's also kind of like competition so like Monopoly these firms are price makers they can charge any price they want and the demand doesn't equal the marginal revenue but like perfect competition it's easy for other firms to enter because there's low barriers so they're going to make no economic profit in the long run but another thing that makes it completely different than perfect competition is the product they are not identical they're differentiated these businesses do have products that are actually very close substitutes but because they're not identical they have some control over the price so that means it's not a price taker and the demand is not horizontal it's actually downward sloping just like a monopoly this shows a monopolistically competitive firm in the short run now how do I know it's the short run well because they're making profit right here is the total revenue there's the total cost and so right there is the profit notice in the short run it's exactly the same as a monopoly graph in every single way but eventually other firms going to see them make profit they're going to enter the industry and that's going to end up with a graph looks just like this the only thing that's different is the ATC hits the demand curve right there at the quantity Where m equals MC this means they're making no economic profit the total revenue is right there the total cost is right there so no economic profit in the long run all right let's back up and figure out how do we go from short run to long run so we've got this graph here is a monopolis competitive firm making profit what's going to happen in the long run other firms going to enter that's not going to shift the ATC what's going to happen is other firms enter that means now these firms have more substitutes so their demand's going to fall when the demand decreases it's going to ship to the left and it's going to cause this firm to be in the long [Music] run so make sure you can draw that graph on your test and you understand the process by which firm's entering will cause the demand fall and it'll be in the long run equilibrium where there's no economic profit if you like these videos leave a comment make sure to subscribe also take a look at the playlist for this unit that covers all the key Concepts and graphs and take a look at my review app a test all right till next time