The correct answer is: the number of rivals increases and product differentiation grows weaker.

Here's why:

1. In monopolistic competition, each firm has a certain degree of market power because their products are differentiated. This means that they can raise their prices without losing all of their customers. Therefore, their demand curves are relatively elastic.

2. In pure competition, firms are price takers because their products are identical to those of their competitors. This means that if they raise their prices, they will lose all of their customers to their competitors. Therefore, their demand curves are perfectly elastic.

3. If the number of rivals in a monopolistically competitive industry increases and product differentiation grows weaker, then the products of the firms in the industry become more identical. This means that if a firm raises its prices, it will lose more customers to its competitors. Therefore, its demand curve becomes more elastic, which is more like the demand curve of a firm in pure competition.

4. The other options do not make the demand curve of a firm in monopolistic competition more like the demand curve of a firm in pure competition. For example, if the substitutability of competing goods decreases or the entry rate of new firms decreases, then the market power of the existing firms increases, which makes their demand curves less elastic. Similarly, if product differentiation increases and the number of rivals decreases, then the market power of the existing firms also increases, which again makes their demand curves less elastic.

Question

The correct answer is: the number of rivals increases and product differentiation grows weaker.

Here's why:

1. In monopolistic competition, each firm has a certain degree of market power because their products are differentiated. This means that they can raise their prices without losing all of their customers. Therefore, their demand curves are relatively elastic.

2. In pure competition, firms are price takers because their products are identical to those of their competitors. This means that if they raise their prices, they will lose all of their customers to their competitors. Therefore, their demand curves are perfectly elastic.

3. If the number of rivals in a monopolistically competitive industry increases and product differentiation grows weaker, then the products of the firms in the industry become more identical. This means that if a firm raises its prices, it will lose more customers to its competitors. Therefore, its demand curve becomes more elastic, which is more like the demand curve of a firm in pure competition.

4. The other options do not make the demand curve of a firm in monopolistic competition more like the demand curve of a firm in pure competition. For example, if the substitutability of competing goods decreases or the entry rate of new firms decreases, then the market power of the existing firms increases, which makes their demand curves less elastic. Similarly, if product differentiation increases and the number of rivals decreases, then the market power of the existing firms also increases, which again makes their demand curves less elastic.

Knowee AI · Accepted Answer

The correct answer is: the number of rivals increases and product differentiation grows weaker.

Here's why:

1. In monopolistic competition, each firm has a certain degree of market power because their products are differentiated. This means that they can raise their prices without losing all of their customers. Therefore, their demand curves are relatively elastic.

2. In pure competition, firms are price takers because their products are identical to those of their competitors. This means that if they raise their prices, they will lose all of their customers to their competitors. Therefore, their demand curves are perfectly elastic.

3. If the number of rivals in a monopolistically competitive industry increases and product differentiation grows weaker, then the products of the firms in the industry become more identical. This means that if a firm raises its prices, it will lose more customers to its competitors. Therefore, its demand curve becomes more elastic, which is more like the demand curve of a firm in pure competition.

4. The other options do not make the demand curve of a firm in monopolistic competition more like the demand curve of a firm in pure competition. For example, if the substitutability of competing goods decreases or the entry rate of new firms decreases, then the market power of the existing firms increases, which makes their demand curves less elastic. Similarly, if product differentiation increases and the number of rivals decreases, then the market power of the existing firms also increases, which again makes their demand curves less elastic.

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