The model of monopolistic competition assumes that
A)there are only a few sellers
B)there are significant barriers to exit
C)each firm charges the same price for its output
D)the buyers are price setters
E)firms are strategically independent

Question

Quizplus · Accepted Answer

The model of monopolistic competition assumes that firms are strategically independent. This means that each firm makes its own pricing decision without considering the actions of other firms in the market. This assumption distinguishes monopolistic competition from other market structures, such as oligopoly, where firms are interdependent and their decisions depend on the actions of their competitors. Therefore, choice E is the best answer. A, B, C, and D are not correct assumptions of monopolistic competition.

The Model of Monopolistic Competition Assumes That