The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-In the context of market structure, the characteristic that best describes a monopolistically competitive market is that:
A)there are few firms in the market.
B)the products produced cannot be easily differentiated.
C)entry and exit are both difficult.
D)firms spend a great deal on advertising and promotion.
E)firms spend very little on advertising and promotion.

Question

The figure given below shows the cost and revenue curves of a monopolist.Figure 11.9
  D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
-In the context of market structure, the characteristic that best describes a monopolistically competitive market is that:
A)there are few firms in the market. 
B)the products produced cannot be easily differentiated. 
C)entry and exit are both difficult. 
D)firms spend a great deal on advertising and promotion. 
E)firms spend very little on advertising and promotion.

Quizplus · Accepted Answer

One of the key features of monopolistic competition is that firms engage in non-price competition, such as advertising and promotion, to differentiate their products from those of competitors. Therefore, D is the correct choice as it identifies a key characteristic of monopolistic competition. The other choices do not accurately describe monopolistic competition. A) Few firms in the market is a characteristic of oligopoly; B) Products that cannot be easily differentiated is a characteristic of perfect competition; C) Entry and exit being difficult is a characteristic of barriers to entry, which can be present in multiple market structures.

The Figure Given Below Shows the Cost and Revenue Curves