Multiple Choice
Which of the following is true of 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 key feature of monopolistic competition?
A
There is free entry and exit in the market
B
Firms sell identical products with no differentiation
C
Firms have some control over price due to product differentiation
D
There are many sellers in the market
Verified step by step guidance1
Step 1: Understand the characteristics of monopolistic competition. Key features include many sellers, product differentiation, and free entry and exit in the market.
Step 2: Analyze the statement 'Firms sell identical products with no differentiation.' In monopolistic competition, products are differentiated, meaning firms sell similar but not identical products.
Step 3: Compare the other options: 'There is free entry and exit in the market,' 'Firms have some control over price due to product differentiation,' and 'There are many sellers in the market.' All of these are true features of monopolistic competition.
Step 4: Conclude that the statement about firms selling identical products with no differentiation is NOT a key feature of monopolistic competition because product differentiation is essential in this market structure.
Step 5: Therefore, identify the correct answer as the statement that firms sell identical products with no differentiation.
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