Which of the following,if true,would be an example of a monopolistically competitive industry?
A)In the utilities industry,average cost declines over all levels of output.
B)In the automobile industry,fixed costs as well as variable costs are high.
C)In the retail trade industry,a large number of firms provide similar products.
D)In the steel industry,a dominant part of the market is served by one firm.
E)In the pharmaceuticals industry,the entire market is served by a small number of large firms.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, there are many firms that provide similar products, but they are not identical. This leads to firms having some market power to set prices, but they also face competition from other firms so they cannot fully control the market. Option A is an example of a natural monopoly, where a single firm has the lowest average costs and dominates the market. Option B could refer to any industry, it does not distinguish between monopolistic competition and other market structures. Option D is an example of a monopoly, where one firm dominates the market and faces no direct competition. Option E is an example of an oligopoly, where only a few large firms dominate the market.

Which of the Following,if True,would Be an Example of a Monopolistically