Which of the following features is common to both perfect competition and monopolistic competition? a. An individual firm faces a horizontal demand curve. b. New firms are free to enter the market in the long-run. c. Each firm produces a perfectly homogeneous product. d. The firms earn positive economic profit in the long run.
a. An individual firm faces a horizontal demand curve.- In PC, firms face a horizontal demand curve and have no pricing power, while in MC firms face a downward sloping demand curve and have some pricing power
b. New firms are free to enter the market in the long-run.- This is true for both PC and MC
c. Each firm produces a perfectly homogeneous product- In PC firms produce homogeneous products, while in Monopolistic competition they produce differentiated products
d. The firms earn positive economic profit in the long run-
In the long run in both cases, firm earn normal profits,
and no economic profits.
Hence, the correct Option is (b)
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