Question

In monopolistic competition, firms achieve some degree of market power _________________.

• A. by virtue of size alone
• B. by producing differentiated products
• C. many interdependent industry produce a homogenous product
• D. because of barriers to exit from the industry

Answer 1

The correct option is B by producing differentiated products

Monopolistic competition is a type of imperfect competition where large number of sellers sell differentiated products which are not perfect substitutes of each other. Hence, as this quality of them to produce differentiated products helps them to gain some degree of market power. Hence, in monopolistic competition, firms achieve some degree of market power.