Because of the number of firms in monopolistic competition,
A) each firm has a large market share.
B) it is possible for the firms to collude.
C) no one firm can dominate the market.
D) one firm has the ability to dictate market conditions.
E) each firm must carefully monitor what its competitors do.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of firms, each with a small market share, which means that no one firm can dominate the market. Unlike in a monopoly, where there is only one firm, or an oligopoly, where a few large firms dominate the market, in monopolistic competition, firms compete with each other based on product differentiation, brand recognition, and other non-price factors. This means that each firm has to carefully monitor its competitors and adjust its strategies accordingly. Collusion, or secret cooperation between firms to control prices or output, is not possible in monopolistic competition because firms are independent and free to pursue their own interests.

Because of the Number of Firms in Monopolistic Competition