Multiple Choice
Which of the following is true for a monopolistically competitive firm in long-run equilibrium?
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13. Monopolistic Competition
Characteristics of Monopolistic Competition
Multiple Choice
Which of the following is NOT a basic characteristic of monopolistic competition?
A
Firms have some control over price due to product differentiation
B
There are many sellers in the market
C
Firms sell identical products with no differentiation
D
There is free entry and exit in the market
Verified step by step guidance1
Step 1: Understand the definition of monopolistic competition. It is a market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation.
Step 2: Identify the key characteristics of monopolistic competition: (a) many sellers, (b) product differentiation giving firms some control over price, and (c) free entry and exit in the market.
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 concept 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 basic characteristic of monopolistic competition.
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