Question

List two ways the market structure of monopolistic competition is similar to a monopoly:

1.)                            [ Select ]                       ["both have single producer", "both earn positive long run economic profits", "both have a demand curve with a negative slope", "none of the answer choices are true"]      

2.)                            [ Select ]                       ["both produce where MR=MC to maximize profits", "both have relatively low barriers to entry", "both are unlikely to make long run adjustments", "none of the answer choices are true"]      

List two ways in which monopolistic competition is similar to perfect competition:

1.)                            [ Select ]                       ["both are not allocatively efficient", "both earn zero long run economic profits", "both face a downward sloping demand curve", "none of the answer choices are true"]      

2.)                            [ Select ]                       ["both have differentiated products", "both operate with excess capacity", "both have a large number of firms that compete against one another", "none of the choices are true"]      

Answer 1

List two ways the market structure of monopolistic competition is similar to a monopoly:

1)both have a demand curve with a negative slope.

in perfect competition demand curve is horizontal ,in monopoly and monopolistic competition demand curve is downward sloping.

2)both produce where MR=MC to maximize profits.

List two ways in which monopolistic competition is similar to perfect competition

1)both earn zero long run economic profits.

due to large no of sellers in perfect competition and monopolistic competition firms earn zero long run profit.

2)both have a large number of firms that compete against one another

entry and exit in market is free in both firm but in monopolistic competition slightly differentiated product is sold whereas in perfect competition homogeneous product is sold .