Most firms operate in monopolistic competition instead of pure competition.

Question

Quizplus · Accepted Answer

Most firms differentiate their products through branding, advertising, and other marketing strategies, which leads to a degree of market power and differentiation from competitors. This creates monopolistic competition, where firms have some control over setting prices and face a downward sloping demand curve, rather than the perfectly elastic demand curve under perfect competition.

Most Firms Operate in Monopolistic Competition Instead of Pure Competition