A monopolistically competitive firm is one
A) that behaves like a monopolist.
B) of many firms that produce slightly different but very similar goods.
C) of many firms that produce goods with no close substitutes.
D) that behaves like a perfect competitor.
E) that is competitive but wants to be a monopolist.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm is characterized by a market structure in which many firms produce slightly differentiated but very similar goods. Each firm has a small amount of market power, as they can differentiate their product from those of their competitors, but they also face some competition from other firms producing similar products. This allows for some pricing power, but not to the extent of a monopolist.

A Monopolistically Competitive Firm Is One