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In a monopolistically competitive industry, price Question 11 options: will be lower than the competitive price...

In a monopolistically competitive industry, price

Question 11 options:

will be lower than the competitive price due to cost savings.

will exceed the monopoly price due to the destructiveness of competitive forces.

cannot be predicted exactly because it is likely to lie between the competitive and monopoly prices.

is contingent on the behavior of other firms because they are mutually interdependent.

is most likely a bit higher than the competitive market price because of the cost of variety.
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Answer #1

Option 3.

cannot be predicted exactly because it is likely to lie between the competitive and monopoly prices.

Explanation: Firms in perfect competition has no market power. Price is the lowest in perfect competition as price equals marginal cost. A monopoly has extreme market power and it can charge high market price. A monopolistically competitive firm lies somewhere between these two extremes. A monopolistically competitive firm has some degree of market power. The price in monopolistically comeptitive market is likely to lie between the competitive and monopoly prices.

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