Monopolistic competition is characterized by
A)one firm selling several products.
B)many firms selling the same product.
C)many firms selling slightly different products.
D)one firm selling one product.

Question

Quizplus · Accepted Answer

Monopolistic competition is a market structure where there are many firms selling products that are differentiated from each other. This differentiation can be in terms of quality, features, packaging, etc. Hence, each firm has some degree of market power, but they are not perfect substitutes for each other. This leads to a downward sloping demand curve for each firm, but there is some price elasticity of demand. This market structure is different from perfect competition, where all firms sell the same product, and monopoly, where there is only one firm selling a product with no close substitutes.

Monopolistic Competition Is Characterized by