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A significant long-run difference between monopoly and competition is that a
A significant long-run difference between monopoly and competition is that
a. there's free entry and exit in a competitive industry, whereas barriers to entry exist in a monopolized market.
b. the monopolist controls market supply, whereas the competitive firm's influence on market supply is imperceptible.
c. the demand curve for the monopolist is the industry demand curve, whereas the demand curve faced by the competitive firm is perfectly elastic.
d. All of the above.
Expert Solution
The correct option is d. All of the above.
Explanation:
Monopolists and perfect-competition are the two completely opposite forms of the market due to their characteristics. All the given statements are significant to explain the difference between these two because:
- The perfect competition allows firms to enter or exit while monopolist threatens new firms to enter.
- A monopolist has the power to influence the price and supply level, whereas firms in the perfect competition face imperceptible supply due to a high degree of competition.
- Monopolist's demand curve defines the industry demand curve because the entire consumer will have only one choice. On the other hand, firms face perfectly elastic demand because close substitutes exist in the market.
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