Final answer:
The correct answer is that the decline in quantity demanded will be smaller for a monopoly compared to a monopolistic competitor when prices are raised, as monopolies face less direct competition and have a less elastic demand curve.
Step-by-step explanation:
When analyzing how price changes affect the quantity demanded in different market structures, it's important to recognize the underlying demand curves that monopolies and monopolistic competitors face. If a monopoly raises its prices, the decline in quantity demanded will generally be smaller than that of a monopolistically competitive firm because the monopoly has no close substitutes, thus holding a stronger position over consumers. When a monopolistic competitor raises its prices, they face the risk of losing customers to firms offering similar products, demonstrating a more elastic demand curve.
Therefore, the correct answer to the student's question is B: the decline in quantity demanded will be smaller for the monopoly. This is because monopolistic competitors will lose more customers than the monopoly due to the availability of substitutes which makes their demand curve more elastic. It's also important to mention that in the long-term, both monopolistic competitors and monopolies might see their economic profits eroded by other factors such as market entry in the case of monopolistic competition, indicating the dynamic nature of these market structures.