In comparing monopolistic competition to perfect competition, the major difference lies in:
A) the number of firms in each industry.
B) the typical firm size in each industry.
C) the degree of entry barriers in each industry.
D) the demand curves faced by individual firms in each industry.
E) the long-run profits of firms in each industry.

Question

Quizplus · Accepted Answer

The major difference between monopolistic competition and perfect competition lies in the demand curves faced by the individual firms in each industry. In perfect competition, firms face a perfectly elastic demand curve, meaning they cannot influence the price of the product they sell. In contrast, in monopolistic competition, firms face a downward sloping demand curve, meaning they have some ability to influence the price of their product.

In Comparing Monopolistic Competition to Perfect Competition, the Major Difference