Which of the following is always associated with monopolistic competition?
A) identical products
B) economic profits in the short run
C) demand curve that lies below the marginal revenue curve
D) demand curves that become more inelastic as new entry occurs
E) product differentiation

Question

Quizplus · Accepted Answer

Product differentiation is a key feature of monopolistic competition, as firms in this market structure differentiate their products in order to capture a share of the market. The other options do not always apply to monopolistic competition - products are not necessarily identical, economic profits may only be present in the short run, the demand curve may not always lie below the marginal revenue curve, and demand elasticity may not always increase with new entry.

Which of the Following Is Always Associated with Monopolistic Competition