1215

Firms in perfectly competitive markets and firms operating in a market characterized by monopolistic competition have several things in common. Which of the following is least likely one of them? Both:

A) operate in markets that have low or no barriers to entry.

B) face perfectly elastic demand curves.

C) maximize economic profit.

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The only item listed in the question that monopolistic competition and pure competition do not have in common is a perfectly elastic demand curve. Under pure competition, producers face a perfectly elastic demand curve, whereas price searchers face downward sloping demand curves.

1215

Which of the following regarding monopolistic competition is most accurate?

A) Each firm produces a differentiated product.

B) Zero barriers to entry and exit exist.

C) There are very few independent sellers.

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Other characteristics of monopolistic competition (also known as competitive price searcher markets) are: a large number of independent sellers, low barriers to entry, and an elastic downward sloping demand curve.

1215

The demand curves faced by monopolistic competitors is:

A) not sensitive to price due to absence of close substitutes.

B) elastic due to the availability of many close substitutes.

C) inelastic due to the availability of many complementary goods.

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The demand for products from monopolistic competitors is elastic due to the availability of many close substitutes. If a firm increases its product price, it will lose customers to firms selling substitute products.

1215

Monopolistic competition differs from pure monopoly in that:

A) monopolists maximize profit; monopolistic competitors do not.

B) monopolistic competitors are price takers, monopolists are not.

C) barriers to entry are high under monopoly, but low under monopolistic competition.

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Monopolistic competition is characterized by the low barriers to enter its competitive markets. In contrast, a monopoly exists only where there are high barriers to market entry.

luqian55

thanks a lot