Figure 12.1.2
-Which of the following is true for both perfect and monopolistic competition?
A) Firms produce a differentiated product.
B) Firms face a downward sloping demand curve.
C) Firms produce a homogeneous product.
D) There is freedom of entry and exit in the long run.

Question

Figure 12.1.2
-Which of the following is true for both perfect and monopolistic competition?
A) Firms produce a differentiated product. 
B) Firms face a downward sloping demand curve. 
C) Firms produce a homogeneous product. 
D) There is freedom of entry and exit in the long run.

Quizplus · Accepted Answer

Both perfect and monopolistic competition have freedom of entry and exit in the long run. In perfect competition, there are no barriers to entry or exit, and in monopolistic competition, firms can enter or exit the market in response to profits or losses. A) is true for monopolistic competition but not for perfect competition, as firms in perfect competition produce a homogeneous product. B) is true for monopolistic competition but not necessarily for perfect competition, as firms in perfect competition face a perfectly elastic demand curve.

Figure 12.1.2 -Which of the Following Is True for Both Perfect and Perfect