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10 November, 06:52

Monopolistically competitive firms A. have no market power because of free entry. B. have no market power because they earn zero economic profit. C. have market power because they face downward sloping demand curves. D. have no market power because price equals marginal cost.

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  1. 10 November, 07:03
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    C. have market power because they face downward-sloping demand curves

    Explanation:

    The monopolistic competition involves many firms competing against each other, but selling products that are distinctive in some way. The competitive firm faces a perfectly elastic (flat) demand curve because the firm can sell the quantity it wishes at the market price. In contrast the demand curve faced by a monopolist is the market demand curve (because is the only firm in the market).

    The demand curve faced by a monopolist competitor is not flat but rather downward-sloping. That means that can raise its price without losing all of its customers or lower its price and gain more customers.
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Home » Business » Monopolistically competitive firms A. have no market power because of free entry. B. have no market power because they earn zero economic profit. C. have market power because they face downward sloping demand curves. D.
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