Which of the following statements is true about monopolistically competitive firms?
A)Unlike perfectly competitive firms, monopolistically competitive firms are able to raise their prices without losing all of their customers.
B)Like perfectly competitive firms, monopolistically competitive firms are not able to raise prices without losing all of their customers because they face competition from firms selling similar products.
C)Like perfectly competitive firms, monopolistically competitive firms maximise their profits by settling price equal to marginal cost.
D)Unlike perfectly competitive firms, monopolistically competitive firms face perfectly inelastic demand curves.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms have some degree of market power due to product differentiation, allowing them to raise prices without losing all customers, unlike perfectly competitive firms which are price takers and would lose customers if they tried to raise prices above the market level.

Which of the Following Statements Is True About Monopolistically Competitive