State any two ways by which monopolistic competition and perfect competition are similar and any three ways in which they are different.

Assessment: WAEC SSCE - Economics - 1996 Subject: Economics

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Answer

Perfect competition	Monopolistic competition
Products are homogeneous (identical).	Products are differentiated (close but not identical substitutes).
The firm is a price taker with a perfectly elastic (horizontal) demand curve.	The firm has some control over price and faces a downward-sloping demand curve.
There is no advertising or selling cost because goods are identical.	Firms advertise and incur selling costs to distinguish their brands.

Perfect competition	Monopolistic competition
Products are homogeneous (identical).	Products are differentiated (close but not identical substitutes).
The firm is a price taker with a perfectly elastic (horizontal) demand curve.	The firm has some control over price and faces a downward-sloping demand curve.
There is no advertising or selling cost because goods are identical.	Firms advertise and incur selling costs to distinguish their brands.

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