Which of the following is NOT an assumption for monopolistic competition?
A) Firms produce goods using a technology with increasing returns to scale.
B) There are many firms in the industry.
C) Firms are price takers.
D) Each firm produces a good that is similar to, but differentiated from, the goods that other firms in the industry produce.

Question

Quizplus · Accepted Answer

Monopolistic competition assumes that firms have some degree of market power due to product differentiation, which means they are not price takers. Therefore, option C is the correct answer as it is not an assumption of monopolistic competition. A, B, and D are all assumptions of monopolistic competition.

Which of the Following Is NOT an Assumption for Monopolistic