Monopolistic competition differs from pure monopoly in that: A) monopolists maximize profits and monopolistic competitors do not. B) monopolistic competitors face a downward-sloping demand curve and monopolists do not. C) monopolistic competitors have low barriers to entry and monopolists do not. D) monopolistic competitors are price takers and monopolists are not.
C
c
Now here’s the question. I thought monopolistic competitors have highly elastic demand (but not perfectly elastic) meaning they would be price takers?
no ALIMAN, monopolistic competition firms have downward sloping deman curve, so they are price searchers as monopy. They advertise to make more sales and earn economic profit as long as they can
I think I had made an error in my notes although what you have stated intuitively makes sense. So as long as the demand curve is not perfectly elastic, there is some price search to be had? This would make sense since there will be a different curve for marginal revenue versus demand (whereas MR = D = P for perfect competition), giving opportunity produce at a point lower than where demand intersects the marginal cost curve.
C Only because monopoly’s have massive barriers to entry, which in essence, allows them to be monopolies in the first place.