In monopolistic competition, the presence of a large number of firms making a differentiated product means that
A) each firm must charge the same price.
B) each firm can set the price of its particular product.
C) firms cannot compete with each other on the basis of price.
D) the price is established by collusive behaviour.
E) each firm must produce the same quantity.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms can differentiate their products from their competitors, and each firm has some market power to set the price of its particular product. The presence of a large number of firms means that there is still competition, but it is not perfect competition where price is the same for all firms.

In Monopolistic Competition, the Presence of a Large Number of Firms