In what way is monopolistic competition like perfect competition?
A) They both lack barriers to entry.
B) They both face downward-sloping demand curves.
C) They both face perfectly elastic demand curves.
D) They both have homogeneous products.

Question

Quizplus · Accepted Answer

Both monopolistic competition and perfect competition lack barriers to entry. In perfect competition, there are no barriers to entry because there are many small firms selling identical products, whereas in monopolistic competition, there are many small firms selling differentiated products, which means that consumers have many substitutes to choose from and it is relatively easy for new firms to enter the market.

In What Way Is Monopolistic Competition Like Perfect Competition