9) Which of the following statements is not true about monopolistic competition in comparison to a perfectly competitive market?OFirms do not have market power in either of the two market structures.There are many firms in both market structures.Firms operating in a monopolistically competitive market make both output and pricing decisions while those in a perfectly competitive marketschoose only the output level.Firms in both market structures make zero economic profits in the long run.Too

The perfect competition will be considered as an unrealistic assumption while on the other hand the monopolistic competition will be a realistic assumptionStatement-a will be False. The demand curve of a monopolistically competitive firm will be downward sloping, and it means that the firm has a degree of market power. In perfect competition there will be zero market power Statement-b will be true. The monopolistic competition has a large number of firms that sell the differentiated products; and thus the monopolistic competition is an industry with a huge number of firms offering differentiated products Statement-c will be true. Because in the monopolistic market the products will be slightly different and therefore it causes the pricing power quickly until new firms enter the market to exploit the pricing power. Therefore companies in monopolistic competition will decide their price and output decisions in the short run. On contrast in perfect competition the market demand and supply determines the price Statement-d will be true. The firms in a monopolistic competition will earn economic profits in the short run, however in the long run firms will be earning zero economic profit because of the freedom of entry and exit in the industry. In similar way the profits and losses for the firms in perfect competition will be eliminated in long run to an infinite number of firms producing infinitely divisible and homogeneous products.