To analyze monopolistic competition in trade, we make several
Assumptions about the market.Which of the following is NOT an
Assumption of monopolistic competition?
A)many firms in the industry
B)easy entry and exit
C)constant longrun average cost
D)increasing returns to scale, falling longrun average cost

Question

To analyze monopolistic competition in trade, we make several
Assumptions about the market.Which of the following is NOT an
Assumption of monopolistic competition?
A)many firms in the industry
B)easy entry and exit
C)constant long­run average cost
D)increasing returns to scale, falling long­run average cost

Quizplus · Accepted Answer

Constant long-run average cost is not an assumption of monopolistic competition. Rather, firms in this type of market structure typically have a downward sloping demand curve and may experience economies of scale up to a point, but will eventually face constant long-run average costs.

To Analyze Monopolistic Competition in Trade, We Make Several