Multiple Choice
Which market structure predominantly uses product differentiation to attract consumers?
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13. Monopolistic Competition
Characteristics of Monopolistic Competition
Multiple Choice
Which of the following is NOT a characteristic of monopolistic competition?
A
There is free entry and exit in the market
B
Firms sell identical products with no differentiation
C
There are many sellers in the market
D
Firms have some control over price due to product differentiation
Verified step by step guidance1
Step 1: Understand the definition of monopolistic competition. It is a market structure characterized by many sellers, free entry and exit, and product differentiation, where each firm has some control over its price.
Step 2: Identify the key characteristics of monopolistic competition: (a) many sellers, (b) free entry and exit, (c) product differentiation, and (d) some control over price.
Step 3: Analyze each option given in the problem to see if it matches these characteristics.
Step 4: Recognize that the statement 'Firms sell identical products with no differentiation' contradicts the characteristic of product differentiation, which is essential in monopolistic competition.
Step 5: Conclude that the option stating 'Firms sell identical products with no differentiation' is NOT a characteristic of monopolistic competition.
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