Applied SENIOR

HIGH
Economics SCHOOL

Self-Learning
Module
Market Structure: 14
Monopolistic Competition
666
Quarter 3
Applied Economics
Quarter 3 – Self-Learning Module 14: Market Structure: Monopolistic Competition
First Edition, 2020

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Applied SENIOR
HIGH
SCHOOL
Economics

Self-Learning
Module

14
Quarter 3

Market Structure:
Monopolistic Competition
Introductory Message

For the facilitator:

Welcome to the Senior High School – Applied Economics Self Learning

Module on Market Structure: Monopolistic Competition!

This Self-Learning Module was collaboratively designed, developed and

reviewed by educators from the Schools Division Office of Pasig City headed by its
Officer-in-Charge Schools Division Superintendent, Ma. Evalou Concepcion A.
Agustin, in partnership with the City Government of Pasig through its mayor,
Honorable Victor Ma. Regis N. Sotto. The writers utilized the standards set by the K
to 12 Curriculum using the Most Essential Learning Competencies (MELC) in
developing this instructional resource.

This learning material hopes to engage the learners in guided and

independent learning activities at their own pace and time. Further, this also aims
to help learners acquire the needed 21st century skills especially the 5 Cs, namely:
Communication, Collaboration, Creativity, Critical Thinking, and Character while
taking into consideration their needs and circumstances.

In addition to the material in the main text, you will also see this box in the
body of the module:

Notes to the Teacher

This contains helpful tips or strategies
that will help you in guiding the learners.

As a facilitator you are expected to orient the learners on how to use this
module. You also need to keep track of the learners' progress while allowing them
to manage their own learning. Moreover, you are expected to encourage and assist
the learners as they do the tasks included in the module.
 For the learner:

Welcome to the Applied Economics Self Learning Module on Market

Structure: Monopolistic Competition!

This module was designed to provide you with fun and meaningful
opportunities for guided and independent learning at your own pace and time. You
will be enabled to process the contents of the learning material while being an
active learner.

This module has the following parts and corresponding icons:

Expectations - This points to the set of knowledge and skills

that you will learn after completing the module.

Pretest - This measures your prior knowledge about the lesson

at hand.

Recap - This part of the module provides a review of concepts

and skills that you already know about a previous lesson.

Lesson - This section discusses the topic in the module.

Activities - This is a set of activities that you need to perform.

Wrap-Up - This section summarizes the concepts and

application of the lesson.

Valuing - This part integrates a desirable moral value in the

lesson.

Posttest - This measures how much you have learned from the
entire module.
 EXPECTATIONS

After going through this module, you are expected to:

1. define monopolistic competition;
2. describe the characteristics of monopolistic competition; and
3. determine the pricing power of monopolistic competition.

PRETEST

Directions: Read each statement carefully. Choose the letter of the best answer and
write it on a separate sheet of paper.

1. Monopolistic competition occurs when an industry has many firms

offering products that are similar but not identical.
A. The statement is correct.
B. The statement is wrong.
C. The statement is sometimes correct.
D. The statement is sometimes wrong.
2. Monopolistic competition is a combination of the characteristics of ____.
A. oligopoly and perfect competition
B. perfect competition and monopoly
C. monopoly and oligopoly
D. none of the above
3. The kind of products offered in a monopolistic competition.
A. homogenous
B. differentiated
C. identical
D. none of the above
 4. The price taker in the monopolistic competition.

A. Seller
B. Buyer
C. Market demand and supply
D. None of the above
5. The price maker in the monopolistic competition.

A. Seller
B. Buyer
C. Market demand and supply
D. None of the above

RECAP

Directions: Describe the perfect competition according to the following

characteristics.

1. Number of Sellers - _________________________________________________________

_________________________________________________________.

2. Type of products - _________________________________________________________.

_________________________________________________________

3. Entry/exit to market - ______________________________________________________

______________________________________________________.

4. Price Power - _______________________________________________________________

_______________________________________________________________.
 LESSON

Previously, we have discussed one of the market structures which is very

typical in the Philippine market – the perfect competition. Sari-sari store and other
micro and small businesses are present in the perfect competition. For today’s
topic, we will discuss another market structure which is monopolistic competition.
This market structure is part of the imperfectly competitive market. An imperfect
market is one in which individual buyers and sellers can influence prices and
production, where there is no full disclosure of information about products and
prices, and where there are high barriers to entry or exit in the market (Kenton,
2020).

Monopolistic Competition
Monopolistic competition is characterized as an industry in which many
firms offer products or services that are similar, but not exactly alike –
differentiated in nature. As consumers, we want to have varieties of products to
choose from. We have the choice to buy the product in terms of the quality,
features, packaging, and even because of its brand name.

Characteristics of Monopolistic Competition

1. It is a blend of perfect competition and monopoly. Just like perfect competition,

there are many similar products available in the market and there are many large
companies which they can influence the price by creating a product identity.

2. The firms sell differentiated products which are highly substitutable but are not
perfect substitutes. Products are not identical, but very similar, so companies use
product differentiation. Let say, shampoo products, there are many variants of
shampoo to choose from like for hair straightening, anti-dandruff, smooth and silky
hair. Product differentiation is a marketing strategy that strives to distinguish a
company's products or services from the competition (Kopp, 2020). The product
differentiation may be in color, packaging, store location, store design, store
decorations, delivery, service, or anything to make the product stand out. Brand
identity is one of the selling point of the firms in a monopolistic competition.

3. There are free entry and exit in the market that enables the existence of many
sellers.

4. The firms are engaged in non-price competition. This involves the advertising of
a product’s appearance, quality, or design which takes to shift the demand curve to
the right without sacrificing the prices.

5. It is similar to a monopoly in which the firm can determine the quantity of the
products and has some price control.
 ACTIVITIES

Activity 1: Describe the Market

Directions: Complete the table by providing the characteristics of monopolistic
competition.

Number of Sellers Type of products

Entry/exit to market Pricing power

Activity 2: Market Structure

Directions: Illustrate at least 5 brands or products that are present in monopolistic
competition. You may use the space below.
 WRAP-UP

To summarize what you have learned in the lesson, answer the following
questions:

1. What is monopolistic competition?

2. What are the characteristics of monopolistic competition?
3. Who determines the price in monopolistic competition?

VALUING

Reflect on this!

“Your most unhappy customers are your greatest source of learning” – Bill Gates

POSTTEST

Directions: Read each statement carefully. Write T if the statement is correct,

otherwise write F.

____________1. Monopolistic competition tends to lead to heavy marketing because

different firms need to distinguish broadly similar products.

____________2. Monopolistic competition is a form of competition that characterizes

several industries that are familiar to consumers in their day-to-day
lives.

____________3. Monopolistic competition is a middle ground between monopoly and

perfect competition.

____________4. Sellers are the price takers in the market.

____________5. Firms in monopolistic competition typically try to differentiate their

product to achieve and capture above market returns.
 POSTTEST:
1. T
2. T
3. T
4. F
5. T

References
About Ashley Sefferman Ashley Sefferman Is Head of Content at Apptentive. A
Digital Communication and Content Strategy Enthusiast. "16 Product
Management Quotes to Leave You Inspired." Apptentive. March 19, 2020.
Accessed July 28, 2020.https://www.apptentive.com/blog/2018/10/11/16-
product-management-quotes/.

Dinio, R. and Villalis, G. Applied Economics. Rex Book Store, Inc. Sampaloc,
Manila, 2017.

Chappelow, Jim. "Monopolistic Competition Definition." Investopedia. April 07,

2020. Accessed July 28, 2020.
https://www.investopedia.com/terms/m/monopolisticmarket.asp.

Kenton, Will. "Imperfect Market: An Inside Look." Investopedia. February 05, 2020.
Accessed July 28, 2020.
https://www.investopedia.com/terms/i/imperfectmarket.asp#:~:text=An
imperfect market is one,or exit in the market.

Kopp, Carol M. "Understanding Product Differentiation." Investopedia. July 19,

2020. Accessed July 28, 2020.
https://www.investopedia.com/terms/p/product_differentiation.asp.