A significant difference between a monopolistically competitive firm and a purely competitive firm is that the
A)former has fewer barriers to entry into the industry.
B)latter recognizes that price must be reduced to sell more output.
C)latter's demand curve is perfectly elastic.
D)latter differentiates its product.

Question

Quizplus · Accepted Answer

The significant difference is that in pure competition, the firm faces a perfectly elastic demand curve, meaning it can sell any quantity of its product at the market price, but cannot influence the price by its own actions. Monopolistically competitive firms face a downward-sloping demand curve, indicating they can influence their price through product differentiation and other means.

A Significant Difference Between a Monopolistically Competitive Firm and a Purely