Compared to a perfectly competitive firm having the same cost curves, a monopolistically competitive firm ________ output and ________ prices.

Question

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In a monopolistically competitive market, firms have some degree of market power, unlike in perfect competition where firms are price takers. This market power allows them to raise prices above marginal costs. As a result, they produce less output at a higher price compared to a perfectly competitive firm, which produces where price equals marginal cost.

Compared to a Perfectly Competitive Firm Having the Same Cost