Question

Which statement concerning monopolistic competition is false? a. Long-run equilibrium under monopolistic competition and pure competition both entail zero economic profits for firms. b. Monopolistic competition is likely to result in a greater variety of product brands than pure competition. c. The monopolistically competitive demand curve is more elastic than the demand curve facing a monopoly. d. Long-run equilibrium in monopolistic competition does not entail any economic inefficiency because of easy entry and exit.

Answer 1

Answer:

b. Monopolistic competition is likely to result in a greater variety of product brands than pure competition.

Explanation:

Monopolistic competition is a competitive structure in which few companies operate in an industry that offers the same type of service or product, but differences. In this way each firm holds the relative monopoly of the product. For example, in the toothpaste market, companies sell the same product (toothpaste) but each company tries to differentiate their product from others.

In the competitive structure, several companies sell various products in a free competitive regime, having no monopoly power. Thus, the number of companies and products is infinitely larger than in monopolistic competition.