Multiple Choice
Which of the following is NOT a basic characteristic of monopolistic competition?
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13. Monopolistic Competition
Characteristics of Monopolistic Competition
Multiple Choice
Which of the following is a good example of a monopolistically competitive market?
A
The market for restaurants in a large city
B
The market for wheat
C
The market for electricity distribution
D
The market for smartphones with only two major producers
Verified step by step guidance1
Understand the characteristics of a monopolistically competitive market: many sellers, differentiated products, free entry and exit, and some degree of market power for each firm.
Analyze each option by checking if it fits these characteristics: for example, the market for wheat is typically a perfect competition example (many sellers, homogeneous product).
Consider the market for electricity distribution, which is usually a natural monopoly due to high infrastructure costs and a single provider.
Look at the market for smartphones with only two major producers, which is closer to an oligopoly (few sellers, some product differentiation).
Evaluate the market for restaurants in a large city: many sellers, differentiated products (different cuisines, styles), and relatively free entry and exit, making it a good example of monopolistic competition.
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