In monopolistic competition, sellers feel they have some competition in a market and consumers see competitive products as heterogeneous.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of small firms operating in a market, where each firm produces a slightly differentiated product. Consumers perceive these products as being somewhat unique, providing sellers with some degree of market power. The perceived product differentiation and the presence of substitutes from other firms give consumers the impression of competition. Hence, sellers feel they have some competition in this market, but the products are not identical.

In Monopolistic Competition, Sellers Feel They Have Some Competition in a Market