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read each statement and determine if it is true or false. a. a monopolistic competitor, much like a firm in perfect competition, sells its product at a point where the price is equal to the marginal cost. true false b. advertising can play a role as an indirect signal of product quality to customers. true false c. monopolistically competitive industries are more likely to make use of advertising to create products that catch on in mainstream popularity than industries in perfect competition. true false d. in the long run, monopolistic competitors make a similar amount of profit to monopolists, since, in both cases, the firm's demand curves are downward sloping, and at the profit maximizing point, the marginal cost is equal to the marginal revenue. true false e. in the short term, a monopolistic competitor will make a profit if the demand curve is above the average total cost curve at some point. true false

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a. False, monopolistic competitor can fix price above their marginal cost.

b. True, advertising acts as indirect signal of product quality to the customers.

c. True, monopolistically competitive industries are more likely to make use of advertising.

d. False, in the long run, monopolistic competitors may or may not have a similar amount of profit to monopolists.

e. True, a monopolistic competitor will make a profit if the demand curve is above the average total cost curve at some point, in short term.

What is Monopolistic competition and give some examples?

  • The monopolistic competition combines aspects of monopoly and perfect competition.
  • Companies have the freedom to enter and quit the market and to offer a variety of products that are similar to one another but do not replace one another.
  • As a result, companies are able to independently control the prices of the goods and services they are providing.
  • Since there is freedom of entry in an industry or region with monopolistic competition and high profits, this will encourage more businesses to enter the market, which will eventually result in average earnings.

Examples:  Fast food companies, Hair dressers, Restaurants, Bakery shops, Running shoes

For better understanding, among famous Fast food businesses, we have Burger King and McDonald’s. Both the companies produce Burgers, French fries, soft drinks etc. which are similar in nature but differ taste and shape. So both the companies have individual power in the market and control their product’s price on their own.

To know more about Monopolistic competition, check out:

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