Question

All of the following characteristics are common to both monopolistic competition and perfect competition except:________

Answer 1

Answer:

The correct answer is option d.

Explanation:

Monopolistic competition is the market where there is a large number of firms producing differentiated products. The firms are price makers and face a downward sloping curve. There is very low or no barriers to entry and exit.  

A perfect competition has a large number of firms producing identical products. These firms are price takers and face a horizontal line demand curve.  There are very low or no barriers to entry and exit.  

The firms in both market forms are trying to maximize profits. The market demand curve is also downward sloping in both. But the monopolistic competition produces differentiated products and firms are price makers.