Which of the following is always associated with monopolistic competition?
A) identical products
B) economic profits in the short run
C) product differentiation
D) Demand curves become more inelastic as new entry occurs.

Question

Quizplus · Accepted Answer

Product differentiation is a key characteristic of monopolistic competition, where firms differentiate their products from the competitors in order to attract customers. This leads to less price sensitivity among consumers and allows firms to charge a higher price than in a perfectly competitive market. A) is not associated with monopolistic competition as products are differentiated. B) Economic profits in the short run are possible but not guaranteed in monopolistic competition. D) Demand curves may become more elastic as new entry occurs due to increased competition.

Which of the Following Is Always Associated with Monopolistic Competition