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In: Economics

What does the supply curve look like for a monopolistically competitive market A Part of MC...

What does the supply curve look like for a monopolistically competitive market
A Part of MC curve
B U-shaped
C Downward Sloping
D There is no supply curve in a monopolistically competitive market

Solutions

Expert Solution

In monopolistic competition, each firm is producing differentiated product so they have some market power.

Generally supply curve explains the one to one relationship between price and quantity supplied. But here in this market form there is no such relation that is it is not necessary that a firm will always increase its output with increase in market price or decrease its output with decrease in price. In perfect competition as firms are choosing equilibrium point where Price=MC so they choose to produce according to the MC so part of MC is supply curve in perfect competition. But here in monopolistic competition firm maximizes profit where MR=MC and Choose quantity and price relationship through demand curve. So part of MC can not be a supply curve here.

No linear relationship between price and output produced cause no supply curve.

Correct option:

D) There is no supply curve in a monopolistically competitive market

Rahul Sunny answered 1 year ago
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