The competitive dimension of monopolistic competition is that
A)High barriers to entry tend to push economic profits toward zero.
B)Consumers view each firm's products as interchangeable.
C)Low barriers to entry tend to push economic profits toward zero.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by low barriers to entry which means new firms can easily enter the market. This leads to increased competition and a tendency for economic profits to be pushed toward zero. Therefore, option C is correct. Option A is incorrect as high barriers to entry are not a characteristic of monopolistic competition. Option B is also incorrect as consumers do not view each firm's products as interchangeable in monopolistic competition.

The Competitive Dimension of Monopolistic Competition Is That