Microeconomics 18th Edition by Campbell McConnell, Stanley Brue, Sean Flynn

Exercise 27

Compare the elasticity of the monopolistically competitor's demand curve with that of a pure competitor and a pure monopolist. Assuming identical long run costs, compare graphically the prices and output that would result in the long run under pure competition and under monopolistic competition. Contrast the two market structures in terms of productive and allocative efficiency. Explain: "Monopolistically competitive industries are characterized by too many firms, each of which produces too little."