If a monopolistic competitor raises its price, it _______ customers than a perfectly
Competitive firm, but _______ that raised its prices would.
A) will lose more; it will lose as many
B) will lose more; it will lose more
C) will lose fewer; it will lose more
D) will lose fewer; it will lose as many

Question

Quizplus · Accepted Answer

A monopolistic competitor has some degree of market power due to product differentiation, so it will lose fewer customers than a perfectly competitive firm, which is a price taker and would lose all its customers if it raised prices. However, a monopolist, with even more market power, would lose more customers if it raised prices, but not as drastically as a perfectly competitive firm, because alternatives might not be readily available.

If a Monopolistic Competitor Raises Its Price, It _______ Customers