Multiple Choice
Suppose the accompanying graph depicts a monopolistically competitive firm. Which of the following is a key characteristic of monopolistic competition illustrated by the graph?
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13. Monopolistic Competition
Characteristics of Monopolistic Competition
Multiple Choice
Under monopolistic competition, entry to the industry is:
A
restricted to firms with perfect information
B
completely blocked by government regulation
C
relatively easy, with few barriers to entry
D
only possible for firms with unique technology
Verified step by step guidance1
Understand the characteristics of monopolistic competition, which typically include many firms, product differentiation, and free entry and exit in the long run.
Recall that in monopolistic competition, there are few barriers to entry, meaning new firms can enter the market relatively easily when they see profit opportunities.
Contrast this with other market structures: perfect competition has free entry, monopoly has blocked entry due to high barriers, and oligopoly may have some barriers due to economies of scale or regulations.
Recognize that 'relatively easy, with few barriers to entry' best describes the entry conditions under monopolistic competition because firms do not need unique technology or government permission to enter.
Conclude that the correct answer is that entry to the industry under monopolistic competition is relatively easy, with few barriers to entry.
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