Question

If there is no product differentiation at​ all, then the individual firm has a demand curve that is A. slightly downward sloping and identical the firm in monopolistic competition. B. unit elastic and identical to the firm in perfect competition. C. perfectly elastic and identical to the firm in perfect competition. D. perfectly inelastic and identical to the firm in perfect competition.

Answer 1

Answer:

C) perfectly elastic and identical to the firm in perfect competition.

Explanation:

In a perfectly competitive market, firms supply identical products, so the customers are indifferent towards buying the product from any supplier. What makes a monopolistic competition market different is that products are differentiated, so the customers will choose from which supplier to purchase the product.

When the products are identical (not differentiated), then the firm's demand curve will be perfectly elastic because a change in price will make their customers simply change the supplier. I.e. the products are all substitutes.

Answer 2

Answer:

A) Slightly downward sloping and identicaI to the firm in monopolistic competition

Explanation:

Product differentiation is a type of strategy a firm uses to improve their products.  When a firm or different firms do not uses product differentiation, there is usually a downward slope in their demand curves. An inward shift in the demand curve might occur when a competitor lowers the price of his product. There might also be a situation when the demand curve becomes elastic if the competitor uses the same style to model his own product, making the products, yours and his, the same.