Monopolistic competition describes a situation where:
A) a few firms produce a standardized product.
B) a large number of firms produce differentiated products.
C) a few firms produce differentiated products.
D) there are substantial barriers to entry.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of firms producing differentiated products. This means that each firm has some market power due to its unique product, but there are still many competitors in the market. A is incorrect because monopolistic competition involves differentiated products, not standardized products. C is partially correct but inaccurately describes the number of firms. D is also incorrect because monopolistic competition typically has low barriers to entry.

Monopolistic Competition Describes a Situation Where