How does monopolistic competition differ from perfect competition?
A) There are more sellers in a market characterized by monopolistic competition.
B) It is easier for sellers to enter a market/industry characterized by monopolistic competition.
C) In a perfectly competitive market, products are more dissimilar.
D) In a market characterized by monopolistic competition, individual firms have some control over price.

Question

Quizplus · Accepted Answer

In a market characterized by monopolistic competition, individual firms have some control over price. This is because they are selling products that are differentiated from their competitors, allowing them to have some pricing power. In contrast, in a perfectly competitive market, products are homogeneous and numerous sellers compete on the same price, leaving no room for individual firms to control price. While there may be more sellers in a market characterized by monopolistic competition as compared to a monopoly, it is still fewer than the number of sellers in a perfectly competitive market. Additionally, it is easier for sellers to enter a market/industry characterized by monopolistic competition as compared to a monopoly or oligopoly, but the entry barriers are still higher than in a perfectly competitive market.

How Does Monopolistic Competition Differ from Perfect Competition