A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i) they both face downward-sloping demand curves.
(ii) they both charge a price that exceeds marginal cost.
(iii) free entry and exit determines the long-run equilibrium.

Question

A firm in a monopolistically competitive market is similar to a monopoly in the sense that (i)	they both face downward-sloping demand curves.
(ii)	they both charge a price that exceeds marginal cost.
(iii)	free entry and exit determines the long-run equilibrium.

Quizplus · Accepted Answer

Both monopolistically competitive firms and monopolies face downward-sloping demand curves and charge prices above marginal cost. However, free entry and exit determining long-run equilibrium is a characteristic of monopolistic competition, not monopoly.

A Firm in a Monopolistically Competitive Market Is Similar to a Monopoly