The key difference between monopolistic competition and perfect competition is that in monopolistic competition the tangency of
A)AC and the demand curve occurs along the negatively sloped part of AC.
B)the demand curve and AC occurs at the minimum point of the AC curve.
C)AC and the demand curve occurs along the positively sloped part of AC.
D)MC and MR at the optimum output.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms face a downward-sloping demand curve, and the tangency of the average cost (AC) curve and the demand curve occurs along the negatively sloped part of the AC curve, indicating that firms have some pricing power and can differentiate their products.

The Key Difference Between Monopolistic Competition and Perfect Competition Is