An industry comprised of 40 firms,none of which has more than 3 percent of the total market for a differentiated product,is an example of:
A) monopolistic competition.
B) oligopoly.
C) pure monopoly.
D) pure competition.

Question

Quizplus · Accepted Answer

Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products. In this case, there are 40 firms, each producing a differentiated product, and none has more than 3 percent of the total market share. This indicates that no single firm has significant control over the market price and there is some degree of competition. Therefore, this scenario best fits the definition of monopolistic competition.

An Industry Comprised of 40 Firms,none of Which Has More