Monopolistic competition is similar to monopoly in that:
A) firms face perfectly elastic demand curves.
B) firms sell products for which there are no close substitutes.
C) there is relatively free entry and exit.
D) firms have some influence over the product price.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by firms selling differentiated products with some market power, allowing them to have some influence over the price. However, there is relatively free entry and exit in the market, which differentiates it from monopoly. Firms also face downward-sloping demand curves, but not perfectly elastic ones (as in a perfectly competitive market).

Monopolistic Competition Is Similar to Monopoly in That