Why Apple is the monopolistically competitive company?

       Nowadays, iPhone 5 and iPad Mini are the nearly popular topics for those who are Apple’s fans and high technology lovers. Why Apple’s company could control the market? Apple’s company could be considered as a large monopolistic competitive firm in the world. Monopolistic competitive firm has large number of sellers. These sellers have small market shares, does not corporate with each other, and independent.

The main characteristic for monopolistically competitive firm is they have product differentiation. Apple’s company differentiated their products by using several aspects. The first aspect is the product attributes. Apple’s has iOS 6 for their operating system which the system can only be used in Apple’s product. Secondly, is the service of Apple company. Apple’s has their own website so that their customer can learn how to use their Apple products and contact for services. Then, is the location of the Apple’s store. Apple’s stores are available in almost all over the world so it is convenience for their customers. Besides that, the brand name and packaging, and the control over price are the aspects to differentiate their products.

Besides that, monopolistically competitive companies such as Apple, Samsung, and Nokia have no barriers to entry into the market. These companies usually need for advertising to ensure that the customers know their differences. Furthermore, the firms are price makers. They usually set their own price because each company produce unique product. As a result, the demand curve will be downwards slopping.

In a short-run profit, the monopolistic competition firm is at profit maximizing level of output which the marginal revenue equals to marginal cost (MR=MC). There are 3 types of profits in short-run. When the total revenue is equal to total cost (TR=TC), the firm is in normal profit which also known as break-even. When the total revenue is larger than the total cost (TR>TC), the firm is having a supernormal profits which also known as abnormal profits. When the total revenue is smaller than total cost (TR<TC), the firm is having a loss so it is subnormal profits. On the other hand, in the long-run profit of the monopolistic competition, the firm only makes normal profits due to the easy entry and exit. 

The following graphs show the short-run profits which include normal profits (Figure 1), supernormal profits (Figure 2), subnormal profits (Figure 3) and long-run profits ( Figure 4).

Figure 1 shows normal profits in the short-run.

Figure 2 shows supernormal profits in the short-run.

Figure 3 shows subnormal profits in the short-run.

Figure 4 shows normal profits in the long-run.

                                                                                                            Written by Chai Ching Wan.