Should Monopolistic Competition Be Regulated?

Regulation is probably not a good solution to the inefficiencies of monopolistic competition, for two reasons. ... Each monopolistically competitive industry has many firms that produce sufficiently substitutable products to provide enough competition to result in relatively low levels of market power.

Why should monopolies be regulated?

Monopolies eliminate and control competition, which increases prices for consumers and limits the options they have. ... Many economists study the impact of monopolies, and all agree that there should be some sort of regulation to increase overall welfare for the country.

Why monopolistic competition is bad?

Markets that have monopolistic competition are inefficient for two reasons. First, at its optimum output the firm charges a price that exceeds marginal costs. The second source of inefficiency is the fact that these firms operate with excess capacity.