The use of word "competition" in the name of the market structure called "monopolistic competition" refers to the fact that ?
Correct answer: A. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market
- A. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market
- B. Monopolistically competitive firms face a downward-sloping demand curve just like competitive firms.
- C. Monopolistically competitive firms charge prices equal to the minimum of their average total cost just like competitive firms.
- D. The products are differentiated in a monopolistically competitive market just like in a competitive market.
Explanation
The competition refers to the presence of many firms and relatively free entry and exit, as in competitive markets. Each firm nevertheless sells a differentiated product and faces a downward-sloping demand curve.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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