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 or 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.
E) In a perfectly competitive market, the size of the firms must be large.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some control over the price of their products due to product differentiation and brand loyalty. In perfect competition, no individual firm has any control over the price as they are price takers. A is incorrect as monopolistic competition typically has fewer sellers than perfect competition. B is incorrect as it is generally easier for firms to enter a market characterized by perfect competition. C is incorrect as products in monopolistic competition are more differentiated. E is incorrect as there is no requirement for the size of firms in either type of competition.

How Does Monopolistic Competition Differ from Perfect Competition