BUSINESS ADMINISTRATION
BUSINESS ENVIRONMENT
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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shift the demand curve for its product to the left
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make its product more similar to its competitors’
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reduce the industry’ s barriers to entry
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make the demand for its product less price elastic
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Detailed explanation-1: -What role does advertising play for monopolistically competitive firms? Advertising will increase demand and reduce demand elasticity. As seen from the short-run equilibrium graph, Q gives the current profit-maximizing output at a price P.
Detailed explanation-2: -One of the characteristics of a monopolistic competitive market is that each firm must differentiate its products. Two ways to do this is through advertising and cultivating a brand. Advertising is a form of communication meant to inform, educate, and influence potential customers about products and services.
Detailed explanation-3: -Demand is highly elastic in monopolistic competition and very responsive to price changes. Consumers will change from one brand name to another for items like laundry detergent based solely on price increases.
Detailed explanation-4: -In Monopolistic competition, firms do produce differentiated products, therefore, they are not price takers (perfectly elastic demand). They have inelastic demand.