Monopolistic competition is defined as a type of market structure in which
A) many firms produce the good.
B) firms produce a homogeneous good.
C) there are barriers to entry.
D) firms can make an economic profit in the long run.
E) firms can easily enter the market but cannot easily exit from it.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of firms producing differentiated products, which means that each firm has a certain degree of market power. There are relatively low barriers to entry, so new firms can enter the market with relative ease. However, firms in monopolistic competition may not be able to earn an economic profit in the long run due to competition and the lack of barriers to entry.

Monopolistic Competition Is Defined as a Type of Market Structure