Monopolistic competition is an industry characterized by:
A) a product with no close substitutes.
B) a horizontal demand curve.
C) a small number of firms.
D) relatively easy entry and exit.

Question

Quizplus · Accepted Answer

Monopolistic competition is an industry where there are a large number of firms competing with each other, but they produce differentiated products. Each firm has some monopoly power over its own product, but there is still some competition within the market. As a result, entry and exit are relatively easy, which is why choice D is the best answer. Choices A and B are incorrect because monopolistic competition products have close substitutes and the demand curve is downward sloping. Choice C is incorrect because there are a large number of firms in monopolistic competition, not a small number.

Monopolistic Competition Is an Industry Characterized By