A firm in a monopolistically competitive market is similar to a monopoly in the sense that
(i)they both face downward-sloping demand curves.
(ii)they both charge a price that exceeds marginal cost.
(iii)free entry and exit determines the long-run equilibrium.
A)(i) only
B)(ii) only
C)(i) and (ii) only
D)(i), (ii), and (iii) only

Question

Quizplus · Accepted Answer

Both monopolistically competitive firms and monopolies face downward-sloping demand curves and charge prices above marginal cost. However, free entry and exit determine long-run equilibrium only in monopolistic competition, not in monopoly.

A Firm in a Monopolistically Competitive Market Is Similar to a Monopoly