A monopolistically competitive firm is like a perfectly competitive firm insofar as both... A) have horizontal MR curves B) can earn no economic profit in the long run. C) are protected by high barriers to entry. D) have negatively sloping demand curves.
Answers
Answer:
Monopolistic competition is the type of imperfect competition such that the producers competing against each other, but selling the same products that are differentiated from one another (e.g. by the branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes prices charged by its rivals as given and ignores the impact of its own prices on prices of other firms. If this happens in presence of coercive government, monopolistic competition will fall into the government-granted monopoly. Unlike perfect competition, firm maintains spare capacity. Models of the monopolistic competition are often used to model industries. Textbook examples of the industries with market structures similar to the monopolistic competition include restaurants, cereal, clothing, shoes, and service industries in the large cities. "founding father" of theory of monopolistic competition is the Edward Hastings Chamberlin, who wrote a pioneering book on the subject, Theory of Monopolistic Competition (1933). Joan Robinson published a book The Economics of Imperfect Competition with the comparable theme of distinguishing perfect from imperfect competition. Further work on monopolistic competition was undertaken by the Dixit and Stiglitz who created the Dixit-Stiglitz model which has proved applicable used in the sub fields of international trade theory, macroeconomics and economic geography.
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Answer:
A monopolistically competitive firm is like a perfectly competitive firm in so far as both can earn no economic profit in the long run.
Explanation:
Among the given options, the right answer is option b that is can earn no economic profit in the long run. In a monopolistic competition companies, make economic profits in the short run, but in the long run, they make zero economic profit, just like a perfectly competitive market.
Monopolistic competition is the type of imperfect competition such that the producers compete against each other, but sell the same products that are different from one another (e.g. by the branding or quality) and hence are not perfect substitutes. In monopolistic competition, a firm takes prices charged by its opponent producer as given and ignores the impact of its own prices on the prices of other firms. If this happens in presence of coercive government, monopolistic competition will fall into the government-granted monopoly. In contrast, whereas a monopolist in a monopolistic market, has total control of the market, the monopolistic competition offers very few barriers to entry. All firms are able to enter a market if they feel the profits are attractive enough. This makes monopolistic competition similar to perfect competition.
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