Using Figure 15.1, identify which demand curve would belong to that of a purely competitive firm and which would belong to a monopolistically competitive firm and explain your reasoning

What will be an ideal response?


The demand curve that a monopolistic competitor faces is likely to be less elastic than the demand curve that a perfectly competitive firm faces. Demand is more elastic than the demand curve that a monopolist faces because close substitutes for the products of a monopolistic competitor are available. Therefore D1 belongs to the purely competitive firm and D2 belongs to the monopolistically competitive firm.

Economics

You might also like to view...

The concept of "the invisible hand" suggests that

A) products are produced out of a seller's sense of charity. B) when the seller is better off, the buyer is worse off. C) sellers exploit consumers with high prices. D) buyers and sellers are self-interested. E) the command system is the only way of efficiently allocating resources.

Economics

The manager of Fatty Foods is thinking about retiring. He has two options: to leave his stores as a company stores, to be managed by a salaried manager, or to sell some of them as franchises. He however has no way of monitoring the salaried managers' activities. What would be his best bet?

a. Let the stores stay company stores b. Sell them off as franchises c. Shut down the business completely d. Never retire

Economics

The nominal interest rate is determined in the market for loanable funds

a. True b. False Indicate whether the statement is true or false

Economics

Which of the following observations regarding economic goods is incorrect? a. They are limited in supply

b. They are desirable. c. They are solely low-priced essential goods. d. They are scarce goods created from scarce resources

Economics