If one were to discuss why the term "monopolistic competition" is used,the best description would be that the industry is "monopolistic" because it
A) has high barriers to entry,but is "competitive" because it has many firms.
B) has low barriers to entry,but is "competitive" because it has few firms.
C) has product differentiation,but is "competitive" because it has many firms.
D) has a monopoly,but is "competitive" because there are low barriers to entry,meaning it has potential rivals.
E) holds patents,but is "competitive" because other firms might invent similar patentable products.

Question

Quizplus · Accepted Answer

"Monopolistic competition" refers to a market structure where there are many firms competing with each other, but each firm offers a slightly differentiated product. This means that there is some degree of market power, or monopoly, for each firm because they can charge a slightly higher price for their differentiated product. However, because there are many firms in the industry, there is still competition, which limits each firm's market power. Therefore, option C best describes why the term "monopolistic competition" is used.

If One Were to Discuss Why the Term "Monopolistic Competition