The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4

-A monopolistically competitive firm faces a relatively-elastic demand curve as compared to a monopolist firm because of the:
A)presence of a large number of buyers and barriers to entry.
B)presence of a large number of firms and easy entry into the market.
C)production of perfectly homogeneous products.
D)production of unique products and the presence of barriers to entry.
E)production of goods that are perfect complements of each other.

Question

The figure given below shows the revenue and cost curves of a firm. MC represents the marginal cost curve, AC the average cost curve, MR the marginal revenue curve, and AR the average revenue curve.Figure 9.4
 
-A monopolistically competitive firm faces a relatively-elastic demand curve as compared to a monopolist firm because of the:
A)presence of a large number of buyers and barriers to entry. 
B)presence of a large number of firms and easy entry into the market. 
C)production of perfectly homogeneous products. 
D)production of unique products and the presence of barriers to entry. 
E)production of goods that are perfect complements of each other.

Quizplus · Accepted Answer

A monopolistically competitive firm faces competition from a large number of firms and has relatively easy entry into the market, leading to a relatively-elastic demand curve. Thus, choice B is the correct answer. Choices A, C, D, and E are all incorrect because they either describe conditions that do not lead to a relatively-elastic demand curve or are not relevant to the characteristics of a monopolistically competitive market.

The Figure Given Below Shows the Revenue and Cost Curves