Chapter 67, Problem 1MCQ

To determine

To state: The characteristic of monopolistic competition.

Answer to Problem 1MCQ

The correct answer is option B

Explanation of Solution

Monopolistic competitors will always try to create popular brand names in order to draw consumers’ attention and thus gain profit.

Monopolistic competition is where there are differentiated goods, there are many firms and there is the freedom to enter and exit.

Monopolistically Competitive firms as the name suggest have 1 feature which is common to monopoly i.e. a differentiated product that provides market power, and one feature that is common to a competitive firm i.e. freedom of entry and exit. This type of market structure is common in market-based economies, and a grocery store shows large numbers of differentiated products: laundry soap, toothpaste, breakfast cereal, biscuits, and so on.

So, the Correct answer is B i.e. there are many sellers in monopolistic competition.