A monopolistically competitive market is characterized by
A)free entry, but not differentiated products.
B)differentiated products, but not long run profits.
C)long run profits, but not many firms.
D)many firms, but not free entry.

Question

Quizplus · Accepted Answer

A monopolistically competitive market has differentiated products, meaning that each firm in the market produces a slightly different product from its competitors. This allows firms to have some degree of market power and charge slightly different prices. However, the market is still competitive in the sense that there are many firms operating in the market. In the long run, firms in a monopolistically competitive market will only earn normal profits (not long run profits). This is because free entry into the market allows for new firms to enter and compete away any excess profits. Therefore, option B is the correct answer.

A Monopolistically Competitive Market Is Characterized by