Question

The monopolistically competitive firm differs from monopoly in that its O a. profit is maximized where MR = MC. 1 b. demand c
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Answer #1

Answer: demand curve is flatter.

Explanation:

A monopolistic market is defined as there are large number of sellers of a selling close substitute goods. The market demand curve is downward sloping. But each individual firm faces the residual demand. A demand curve of a firm in a monopolistic competition is called residual demand curve, a demand curve which shows the demand for product of one particular firm. A residual demand curve is flatter than the market demand curve because individual firm demand is more elastic than market demand.

On the other hand, in a monopoly market there is only one firm selling a good. There is no substitue for the good. The firm demand curve is same as market demand curve. So, it is steeper than the demand curve of a firm in monopolistically competitive market.

hus, option [C] is correct answer.

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