Question

How do firms in monopolistic competition​ compete? Firms in monopolistic competition compete in three​ areas, which are​ _______. A. ​quality, price, and marketing B. number of retail​ outlets, price, and marketing C. ​price, celebrity​ endorsements, and sporting event sponsorships D. ​quality, celebrity​ endorsements, and sporting event sponsorships

Answer 1

Answer:

The correct answer is option A.

Explanation:

Monopolistic competition refers to the market structure where there is a large number of buyers and sellers in the market. These sellers sell heterogeneous or differentiated products in the market.  

The firms are price makers and face a downward-sloping demand curve. There is a high degree of competition in the market due to product differentiation. That is why there is little difficulty in an entry into the market.  

Because of product differentiation, the firms advertise their products in order to gain market share. So the existing firms in the market compete in quality, price, and marketing.