In a monopolistically competitive market,
A)entry by new firms is impeded by barriers to entry; thus, the number of firms in the market is never ideal.
B)entry by new firms is impeded by barriers to entry, but the number of firms in the market is nevertheless always ideal.
C)free entry ensures that the number of firms in the market is ideal.
D)there may be too few or too many firms in the market, despite free entry.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, there may be too few or too many firms in the market despite free entry. This is because firms in this market have some degree of market power and are able to differentiate their products from their competitors. As a result, consumer preferences for certain brands or types of products can lead to firms becoming dominant players in the market, while smaller firms may struggle to compete. Therefore, while entry is generally free, the number of firms in the market can be influenced by other factors such as consumer preferences, advertising, and product differentiation.

In a Monopolistically Competitive Market