If a monopoly or a monopolistic competitor raises their prices, then decline in quantity demanded will...
If a monopoly or a monopolistic competitor raises their prices, then
| decline in quantity demanded will be larger for the monopoly. | |
| decline in quantity demanded will be larger for the monopolistic competitor. | |
| the quantity demanded for the monopoly product falls to zero. | |
| the quantity demanded for the monopolistic competitor will fall to zero. |
Homework Answers
Option B (decline in quantity demanded will be larger for the monopolistic competitor) is correct.
Reason: Under monopolistic competition buyers have option to switch as close substitute goods are available and therefore, a rise in price will cause a higher fall in quantity demanded under monopolistic competitor.
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