A market in which there are many firms each selling differentiated products is most likely a ________ market.

Question

Quizplus · Accepted Answer

A market in which there are many firms each selling differentiated products is most likely a monopolistically competitive market. In this market structure, firms have some market power due to the differentiation of their products, but they still face competition from other firms selling similar products. This results in a relatively low level of barriers to entry and a range of prices and outputs. Perfectly competitive markets have identical products sold by numerous small firms with no control over the market price, while monopolies have a single seller with complete control over the price. Natural monopolies occur when economies of scale are so large that one firm can supply the entire market at a lower average total cost than two or more firms.

A Market in Which There Are Many Firms Each Selling