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Question
Demand elasticity for monopolistically competitive firms is best described as
a. perfectly elastic, because market competition eliminates pricing power.
b. perfectly inelastic, because differentiation is awarded with monopoly pricing.
c. monopolistically elastic, as the forces of competition mitigate the market power created by significant entry barriers.
d. competitively inelastic, as the forces of competition generate demand that is not sensitive to changes in price.
e. relatively elastic, because differentiation offsets the perfect elasticity of a perfectly competitive market.
Answer
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