In both monopolistic competition and perfect competition,
A) firms sell identical products.
B) there is easy entry and exit.
C) firms are price takers.
D) firms face horizontal demand curves.
E) the marginal revenue curve and the demand curve are the same.

Question

Quizplus · Accepted Answer

Both monopolistic competition and perfect competition have easy entry and exit, meaning that new firms can enter or leave the industry without facing significant barriers. However, the other statements are not true for both types of competition. In monopolistic competition, firms sell differentiated products, face downward-sloping demand curves, and have some market power to set prices. In perfect competition, firms sell identical products, are price takers, and face horizontal demand curves. The marginal revenue curve and the demand curve are also not necessarily the same in either type of competition.

In Both Monopolistic Competition and Perfect Competition