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Questions and Answers
Which market structure is characterized by product differentiation?
Which market structure is characterized by product differentiation?
- Perfect competition
- Monopoly
- Monopolistic competition (correct)
- Oligopoly
What is the distinguishing factor of monopolistic competition?
What is the distinguishing factor of monopolistic competition?
- Close substitutes for products (correct)
- Pricing power
- Low entry and exit costs
- Large number of potential buyers and sellers
How do suppliers differentiate their products in monopolistic competition?
How do suppliers differentiate their products in monopolistic competition?
- By offering lower prices
- By producing more quantity
- By increasing entry barriers
- By advertising and non-price strategies (correct)
What is a characteristic of monopolistic competition?
What is a characteristic of monopolistic competition?
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Which market structure allows for entry and exit with low costs?
Which market structure allows for entry and exit with low costs?
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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.
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Description
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.
