Pregunta
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.
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.
Ask by Mcfarlane Simpson. in the United States
Mar 16,2025
Solución de inteligencia artificial de Upstudy
Respuesta verificada por el tutor
Responder
Statement a is correct.
Solución
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Analyzing Statement a:
- In monopolistic competition, firms sell differentiated products and face a downward sloping demand curve.
- This feature gives them some control over the price they charge.
- Similarly, a monopoly has a downward sloping market demand curve, so the monopolist is also a price maker.
- Therefore, statement a is correct.
-
Analyzing Statement b:
- Perfect competition is characterized by homogeneous products, meaning products are identical across firms.
- Monopolistic competition, by contrast, involves differentiated products.
- Hence, stating that they are similar because both have differentiated products is incorrect.
-
Analyzing Statement c:
- Oligopoly is characterized by strategic interactions among a few interdependent firms.
- In monopolistic competition, while each firm has some market power due to product differentiation, the large number of competitors generally minimizes strategic interaction.
- Thus, this statement is incorrect.
-
Analyzing Statement d:
- In perfect competition, firms face a perfectly elastic demand curve, meaning
for all firms. - Monopolistic competition firms, however, face a downward sloping demand curve due to product differentiation.
- This makes the statement false.
- In perfect competition, firms face a perfectly elastic demand curve, meaning
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Simplifique esta solución Extra Insights
Monopolistic competition indeed has some unique features! It resembles monopoly in that firms can exert some control over their pricing due to product differentiation; however, they don’t have the same market power as a true monopoly where one firm dominates. Instead, firms in monopolistic competition engage in a bit of creativity to attract customers through variations in their products.
In the real world, many industries, like the fast-food sector or clothing brands, epitomize monopolistic competition. Companies like McDonald’s and Burger King compete by offering different menus and experiences, creating a unique niche for themselves despite being in a crowded field. This strategy allows them to enjoy some pricing power while still facing competition from others in similar markets.
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