In monopolistic competition, firms sell a differentiated product. ...

[jayhills49]

In monopolistic competition, firms sell a differentiated product. In perfect competition, firms sell an identical product. How do these markets differ as a result?
 
  What will be an ideal response?

Question 2

How can we measure the cost of risk?
 
  What will be an ideal response?

[lgoldst9]

Answer to Question 1

Because of this difference, firms in monopolistic competition face a downward sloped demand curve and have price setting power. Firms in perfect competition do nottheir demand curves are horizontal. Because of this difference, in the long run, perfectly competitive firms produce at minimum average cost while monopolistically competitive firms have excess capacity.

Answer to Question 2

The cost of risk is the amount by which expected wealth must be increased to give the same expected utility as a no-risk situation.

[jayhills49]

Gracias!

[jordangronback]

Excellent