A Monopolistically Competitive Industry Combines Elements of Both Competition and Monopoly

question 33

Multiple Choice

A monopolistically competitive industry combines elements of both competition and monopoly. It is correct to say that the competitive element results from

• A) a relatively large number of firms, and the monopolistic element from product differentiation.
• B) product differentiation, and the monopolistic element from high entry barriers.
• C) a perfectly elastic demand curve, and the monopolistic element from low entry barriers.
• D) a highly inelastic demand curve, and the monopolistic element from advertising and product promotion.

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Definitions:

Depreciation

The methodical distribution of the expense of a physical asset throughout its lifespan, indicating the decrease in its value as time passes.

Asset

An economic resource owned or controlled by an individual or organization that is expected to produce future benefits.

Provide Services

The act of performing tasks or duties for customers or clients in exchange for compensation.

Operating Expenses

Operating expenses are the costs associated with running a company's day-to-day activities, excluding the cost of goods sold.