Question

Assume that a pure monopolist and a purely competitive market differ in terms of:

A) Number of firms
B) Product differentiation
C) Price elasticity
D) Barriers to entry

Answer 1

Monopolies and perfectly competitive markets differ in terms of number of firms, product differentiation, price elasticity, and barriers to entry.

Step-by-step explanation:

Monopolies and perfectly competitive markets differ in terms of:

1. Number of firms: In a monopoly, there is only one firm dominating the market, while in a perfectly competitive market, there are many small firms.
2. Product differentiation: Monopolies often produce unique or differentiated products, while perfectly competitive markets have homogeneous products.
3. Price elasticity: Monopolies have a downward-sloping demand curve and can charge higher prices, while perfectly competitive markets have a perfectly elastic demand curve.
4. Barriers to entry: Monopolies have significant barriers to entry, such as legal rights, patents, or control over essential resources, that prevent other firms from entering the market. Perfectly competitive markets have no barriers to entry or exit.