Economics • Economic BasicsMedium
In market structures, what defines 'Monopolistic Competition'?
A. A single firm controlling the entire supply of a unique product with no substitutes.
B. A small number of large firms interdependent on each other's strategic choices.
C. Many firms producing differentiated products with low barriers to entry.✓ Correct Answer
D. Numerous price-taker firms selling a completely homogenous product.
💡 Solution & Explanation
Monopolistic competition is characterized by a large number of independent firms offering differentiated products that are close substitutes, accompanied by low barriers to market entry. Pure monopolies involve a single seller with unique products, whereas perfectly competitive markets deal exclusively in homogeneous goods.
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