A main difference between a monopolist and a monopolistic competitor is:
A) monopolistic competitors engage in advertising campaigns but monopolists do not.
B) the monopolist can earn excess profit over the long run but the monopolistic competitor cannot.
C) if the monopolistic competitor raises its price slightly it will lose all of its buyers, but this is not true for the monopolist.
D) the monopolist's demand curve is downward sloping but the monopolistic competitor's demand curve is horizontal at the going market price.

Question

Quizplus · Accepted Answer

The key difference between a monopolist and a monopolistic competitor is that a monopolist can earn excess profits in the long run due to the lack of competition and barriers to entry, whereas a monopolistic competitor, due to the presence of many competitors and free entry and exit in the market, cannot earn excess profits in the long run as any economic profit attracts new entrants, increasing competition and driving down prices and profits.

A Main Difference Between a Monopolist and a Monopolistic Competitor