Question

Monopolistic competition differs from perfect competition primarily because _________________.

• A. in monopolistic competition, firms can differentiate their products
• B. in perfect competition, firms can differentiate their products
• C. In monopolistic competition, industry produces all of the market supply of goods
• D. In Perfect competition, the exits are too less

Answer 1

The correct option is A in monopolistic competition, firms can differentiate their products

Monopolistic competition is a type of imperfect competition where large number of sellers sell differentiated products which are not perfect substitutes whereas perfect competition is one where buyers and sellers are numerous and well informed about the market and they sell homogenous product. Hence, monopolistic competition differs from perfect competition primarily because in monopolistic competition, firms can differentiate their products.