question archive A monopolistically competitive firm is like an oligopolistic firm as A
A monopolistically competitive firm is like an oligopolistic firm as A
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A monopolistically competitive firm is like an oligopolistic firm as
A. both face perfectly elastic demand.
B. both have MR curves that lie beneath their demand curves.
C. both can earn an economic profit in the long run.
D. neither is protected by high barriers to entry.
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The correct answer is: B. both have MR curves that lie beneath their demand curves.
Firms in an oligopoly market and in a monopolistic competitive industry are price setters. That is, they have a downward sloping demand curve. In this case, their marginal revenue curves lie below the demand equation since oligopolies and monopolistic competitive firms have to reduce their selling price in order to sell an additional unit of their products.
