What is the biggest difference between monopoly and monopolistic competition?
A) Monopolistic competitors charge a price in excess of marginal cost.
B) Monopolists can differentiate their products.
C) Monopolistic competitors face a more elastic demand curve than monopolists.
D) Monopoly faces a downward-sloping demand curve.

Question

Quizplus · Accepted Answer

The biggest difference between monopoly and monopolistic competition is that monopolistic competition faces a more elastic demand curve than monopoly. Monopolistic competition involves firms selling differentiated products, whereas monopoly involves a single firm selling a unique product with no close substitutes. Both monopolistic competition and monopoly charge a price in excess of marginal cost and face a downward-sloping demand curve. However, the demand curve for monopolistic competition is more elastic because consumers have more substitutes to choose from. Monopolists can also differentiate their products, but it is not the biggest difference between the two market structures.

What Is the Biggest Difference Between Monopoly and Monopolistic Competition