Monopolistic competition occurs when an individual firm
A) obtains complete control over prices--through collusion.
B) differentiates its product from competitors--in the eyes of some customers.
C) develops products which have no substitutes.
D) obtains complete control of the supply of a product.
E) All of the above.

Question

Quizplus · Accepted Answer

Monopolistic competition occurs when a firm differentiates its product from competitors in the eyes of some customers. This allows the firm to have some pricing power and control over its own demand curve, but there are still a number of other competitors in the market offering similar products, leading to competition on other factors such as marketing, branding, and customer service. The other options listed (A, C, D, and E) do not accurately describe monopolistic competition.

Monopolistic Competition Occurs When an Individual Firm