5 Questions
Which market structure is characterized by product differentiation?
Monopolistic competition
What is the distinguishing factor of monopolistic competition?
Close substitutes for products
How do suppliers differentiate their products in monopolistic competition?
By advertising and non-price strategies
What is a characteristic of monopolistic competition?
Some pricing power
Which market structure allows for entry and exit with low costs?
Monopolistic competition
Study Notes
Monopolistic Competition
- Monopolistic competition is a market structure characterized by product differentiation.
- The distinguishing factor of monopolistic competition is the presence of many firms producing differentiated products.
- Suppliers differentiate their products in monopolistic competition through non-price competition, such as advertising, branding, and quality differences.
- A characteristic of monopolistic competition is that there are many firms, free entry, and exit, but firms still have some degree of market power due to product differentiation.
- Monopolistic competition is a market structure that allows for entry and exit with low costs, making it easy for new firms to enter and existing firms to exit the market.
Test your knowledge of monopolistic competition with this quiz! Learn about the distinct characteristics of this hybrid market structure, including product differentiation and the role of non-competitive factors.
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