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Occupational licensing

At a glance, the demand curves faced by a monopoly and monopolistic competitor look similar—that is, they both slope down. Still, the underlying economic meaning of these demand curves is different because a monopolist faces the market demand curve and a monopolistic competitor does not.

Cellular Competition

Recall that monopolistic competition refers to an industry that has more than a few firms that each offer a distinguished product. The Canadian cellular industry is one such market. With a history dating back as far as Alexander Graham Bell’s invention of the telephone in 1876, the Canadian cellular industry now has a number of large firms including Rogers, Telus, and Bell. What about Fido, Koodo, and Virgin Mobile? They are owned by Rogers, Telus, and Bell, respectively. While this market has some similarities to an Oligopoly (which we will not explore in this course), it is often classified as a monopolistic competition.

Consider what you would do if your monthly cell phone bill increased by $2. Would you switch to another company? Likely not. This means that the cellular market is certainly not perfectly competitive as cell phone companies have some ability to change prices. Therefore, the demand faced by each of the cellular companies will be more elastic than market demand, but not perfectly elastic. Let’s explore how these monopolistic competitive firms set prices.