One of the major differences between a monopolist and a purely competitive firm
ID: 1119940 • Letter: O
Question
One of the major differences between a monopolist and a purely competitive firm is that the monopolist has a _______ demand curve, while the purely competitive firm has a _______ demand curve.
1) downward-sloping; perfectly elastic
2) perfectly inelastic; perfectly elastic
3) downward-sloping; perfectly inelastic
4) perfectly elastic; downward-sloping
The women's dress industry is monopolistically competitive. This means that one of the following conditions applies to this industry:
1) there are thousands of dress suppliers, all selling identical products.
2) dresses tend to be differentiated among the many sellers serving this market.
3) there is freedom of entry but not exit in this industry.
4) prices tend to be lower than if the dress industry approximated perfect competition.
Explanation / Answer
Q1
Answer
Option1
the monopolistic competitive firm faces downward demand curve because of differentiated product and perfect competitive firm faces horizontal or perfectly elastic demand curve because it faces identical products.
Q2
Option 2
the monopolistic market has differentiated product.
free entry and exit
the prices are higher than perfect competitive industry because it charges the price higher than MC
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