Question

(1)Product differentiation makes the demand for a monopolistically competitive firm’s product

A	perfectly elastic.

B	more elastic than in a competitive market.

C	perfectly inelastic.

D	less elastic than that of a monopoly.

E	less elastic than in a competitive market.

2.

Successful advertising under monopolistic competition might

A	help consumers understand why products in the industry are homogeneous.

B	reduce the price elasticity of demand for that firm’s output.

C	create a high barrier to entry.

D	make the demand for a firm’s product more elastic.

E	promote lower-quality products.

Answer 1

Q1
Answer
Option D
less elastic than that of a monopoly

The product differentiation changes the product from perfect substitute to close substitute so the elasticity of demand decreases from infinity to elastic but not inelastic.

==========
Q2
Answer
Option B
reduce the price elasticity of demand for that firm’s output.

Successful advertising makes the product a brand and increases popularity which decreases the elasticity as the consumer response prices less than before.