Question

The demand curve of a monopolistically competitive producer is Multiple Choice less elastic than that of either a pure monopolist or a pure competitor. less elastic than that of a pure monopolist, but more elastic than that of a pure competitor. more elastic than that of a pure monopolist, but less elastic than that of a pure competitor. more elastic than that of either a pure monopolist or a pure competitor.

Answer 1

Answer:

more elastic than that of a pure monopolist, but less elastic than that of a pure competitor.

Explanation:

A perfect competition is characterized by many buyers and sellers of homogenous goods and services. Market prices are set by the forces of demand and supply. There are no barriers to entry or exit of firms into the industry.  In the long run, firms earn zero economic profit.  

A monopolistic competition is when there are many firms selling differentiated products in an industry. the demand curve is downward sloping. it sets the price for its goods and services.

An example of monopolistic competition are restaurants  

A monopoly is when there is only one firm operating in an industry. there are usually high barriers to entry of firms. the demand curve is downward sloping. it sets the price for its goods and services.  An example of a monopoly is a utility company

Price elasticity of demand measures the responsiveness of quantity demanded to changes in price of the good.

If the absolute value of price elasticity is greater than one, it means demand is elastic. Elastic demand means that quantity demanded is sensitive to price changes.  

Demand is inelastic if a small change in price has little or no effect on quantity demanded. The absolute value of elasticity would be less than one

Demand is unit elastic if a small change in price has an equal and proportionate effect on quantity demanded.  

Perfect competition has a perfectly elastic demand.

A monopolistic competition's demand is more elastic than that of a monopoly because there are more than one firm in the industry unlike a monopoly

so, perfect competition has the most elastic demand, followed by a monopolistic competition and then a monopoly