Which of the following is a similarity between monopolistic competition and monopoly?
A) Both can expect positive long-run economic profits.
B) Both have perfectly elastic demand curves.
C) Both charge a price in excess of marginal cost.
D) Both are protected by a barrier to entry.

Question

Quizplus · Accepted Answer

Both monopolistic competition and monopoly have some market power that allows them to charge a price higher than marginal cost. However, in the long run, firms in monopolistic competition can only expect to earn normal profits, while a monopoly can continue to earn economic profits. Therefore, A and D are not correct. B is also not correct because in monopolistic competition, the demand curve is downward-sloping but not perfectly elastic.

Which of the Following Is a Similarity Between Monopolistic Competition