The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-Which of the following is not true of monopolistic competition?
A)There are a large number of buyers and sellers.
B)The firms produce differentiated products.
C)There exists free entry and exit of firms.
D)Each of the firms faces a horizontal demand curve.
E)Each of the firms acts as a mini monopoly in the market.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-Which of the following is not true of monopolistic competition?
A)There are a large number of buyers and sellers. 
B)The firms produce differentiated products. 
C)There exists free entry and exit of firms. 
D)Each of the firms faces a horizontal demand curve. 
E)Each of the firms acts as a mini monopoly in the market.

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of buyers and sellers, differentiated products, free entry and exit of firms, and each firm facing a downward-sloping demand curve (not necessarily horizontal). Therefore, statement D is not true of monopolistic competition.

The Figure Given Below Shows the Revenue and Cost Curves