The reason that the coffeehouse market is monopolistically competitive rather than perfectly competitive is because
A) barriers to entry are very low.
B) there are many firms in the market.
C) products are differentiated.
D) entry into the market is blocked.

Question

Quizplus · Accepted Answer

In a perfectly competitive market, all products are homogeneous and identical, while in a monopolistically competitive market, products are differentiated. This means that coffee shops compete on the basis of product differentiation, such as the quality of coffee, ambiance, location, and services provided. Moreover, in monopolistically competitive markets, there are low barriers to entry, and many firms operate. Therefore, although individual coffee shops may have some market power, they must still compete against other businesses in the market, limiting their ability to control prices or dominate the market.

The Reason That the Coffeehouse Market Is Monopolistically Competitive Rather