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4 November, 15:35

Monopolistic competition exists when there is one large firm in an otherwise perfectly competitive market. True or False?

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  1. 4 November, 17:38
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    False. The characteristics of monopolistic competition are that there are many sellers, product differentiation and free entry and exit. The key difference between perfect competition and monopolistic is that in perfect competition firms are selling products that are identical so you can substitute one for another, while in monopolistic the products are similar but not quite the same. The demand curve for a perfectly competitive firm is horizontal since it has no market power and is a price taker, while a monopolistic firm is downward sloping with some kind of market power.
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