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4 January, 03:47

Monopolistic competition is similar to perfect competition in that: Select one: a. there are a large number of firms b. firms earn economic profits in the long run c. firms face downward-sloping demand curves

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  1. 4 January, 07:06
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    The correct answer is option a.

    Explanation:

    A monopolistic competition is a form of market where there are large number of buyers and sellers. The firms produce differentiated products which are close substitutes. There is high degree of competition in the market. The firms face a downward sloping demand curve. There are few restrictions on entry and exit.

    A perfect competition has large number of buyers and sellers as well. Though there is no restriction on entry and exit. The firms face a horizontal demand curve. They produce homogenous demand curve. The firms cannot earn super normal profits in the long run.
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