Question

Which of the following statements is correct? a. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.

Answer 1

Answer:

Letter a is correct. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.

Explanation:

A monopoly is an economic situation whose main characteristic is imperfect competition, that is, only one company owns a market for a particular good or service and for this reason is able to influence the price of that good or service for its own benefit.

Monopolistic competition resembles monopoly in that it is characterized by business competition for similar but not equal products, so they are also capable of making the price, since similar products sold on the market cannot be considered perfect substitutes.

Answer 2

Answer:

a. Monopolistic competition is similar to monopoly because both market structures are characterized by firms being price makers rather than price takers.

CORRECT Both are price makers there is high differenciation between product thus each firm can set his own price while monopoly can determinate the price as is the only firm in the market

Explanation:

b. Monopolistic competition is similar to perfect competition because both market structures are characterized by differentiated products

INCORRECT in a competitive market the product are homogeneuos

c. Monopolistic competition is similar to oligopoly because both market structures are characterized by strategic interaction between firms in the market

INCORRECT  as there are many numbers of seller there is no room to colude or generate common ground between companies.

d. Monopolistic competition is similar to perfect competition because both market structures are characterized by perfectly elastic demand curves for firms.

INCORRECT

Under monopositic competition If the demand were inelastic firms will increase the price as much as they can until demand becomes elastic but it may or not be perfectly elastic

Under perfect competition the demand curve is entirely elastic.