Question

why do we use a graph of a monopolist to illustrate the decisions of a firm in monoplistic competition?

Answer 1

Becasue both the firms in the market are price searchers i.e. both the monopoly and the firm under monopolistic competition produce at the point at the point were both the marginal cost and the marginal revenue will be same. Both the types of firms have some control over the price of the goods and by reducing the price they will increase the sale of the good and revenue. Both produce at the point were the ATC is downward sloping and have excess capacity.

So apart from the fact that there is free entry and exit in the market both the firms behave similarly. so we use the same graph for both the firms.