One of the characteristics of monopolistic competition is that
-
A.
there is mobility of factors of production -
B.
no single seller dominates the market -
C.
the firms are price-takers -
D.
consumers have perfect knowledge of price
Correct Answer: Option B
Explanation
Monopolistic competition is an industry in which many firms offer products or services that are similar, but not perfect substitutes. Barriers to entry and exit in a monopolistic competitive industry are low, and the decisions of any one firm do not directly affect those of its competitors.
The following are Characteristics of monopolistic competition
- Product differentiation.
- Many firms.
- Freedom of Entry and Exit.
- No single seller dominates the market
- Independent decision making.
- Some degree of market power.
- Buyers and sellers do not have perfect information (Imperfect Information)