Which of the following is a distinction between perfectly competitive and monopolistic competition?
A) Perfectly competitive firms must compete with rival sellers; monopolistically competitive firms do not confront rival sellers.
B) Monopolistically competitive firms can raise their price without losing sales; perfectly competitive firms must lower their price in order to sell more of their product.
C) Perfectly competitive firms confront a perfectly elastic demand curve; monopolistically competitive firms face a downward-sloping demand curve.
D) Perfectly competitive firms may make either economic profits or losses in the short run, but monopolistically competitive firms always earn an economic profit.

Question

Quizplus · Accepted Answer

The main distinction between perfectly competitive and monopolistically competitive markets is the shape of the demand curve faced by each. In a perfectly competitive market, firms face a perfectly elastic demand curve, meaning they must sell their product at the market price and cannot influence the price through their individual actions. In contrast, monopolistically competitive firms face a downward-sloping demand curve, meaning they have some market power to influence the price of their product. This allows them to raise their price to a certain extent without losing all their sales, but they still face competition from similar products. Choices A, B, and D are incorrect because they do not accurately describe the differences between the two market structures.

Which of the Following Is a Distinction Between Perfectly Competitive