Multiple Choice
Which of the following industries is most likely to be monopolistically competitive?
88
views
13. Monopolistic Competition
Characteristics of Monopolistic Competition
Multiple Choice
Which of the following statements concerning monopolistic competition is false?
A
Firms in monopolistic competition face barriers to entry.
B
Firms in monopolistic competition sell differentiated products.
C
Firms have some control over the price due to product differentiation.
D
There are many firms competing in the market.
Verified step by step guidance1
Step 1: Understand the characteristics of monopolistic competition. These include many firms in the market, product differentiation, and free entry and exit (no significant barriers to entry).
Step 2: Analyze each statement in the problem: (a) 'Firms in monopolistic competition face barriers to entry' — recall that monopolistic competition typically has low or no barriers to entry, so this statement may be false.
Step 3: Check the statement 'Firms in monopolistic competition sell differentiated products' — this is true because product differentiation is a key feature of monopolistic competition.
Step 4: Evaluate 'Firms have some control over the price due to product differentiation' — this is true since differentiation gives firms some price-setting power.
Step 5: Consider 'There are many firms competing in the market' — this is true as monopolistic competition involves many firms competing.
Related Videos
Related Practice
