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Which characteristic is unique to monopolistic competition compared with perfect competition?
AComplete absence of any monopoly element
BA single seller controlling the whole market
CA perfectly elastic firm demand curve
DProduct differentiation among many sellers
Answer & Solution
Correct answer: D. Product differentiation among many sellers
1. Both markets have a large number of firms and easy entry and exit.
2. Perfect competition assumes a homogeneous product, giving each firm a flat demand curve.
3. Monopolistic competition has differentiated products, giving each firm some price control.
4. So product differentiation is the distinguishing feature.
_Source: ICAI BoS CA Foundation Paper 4 Business Economics, Ch 4 Unit III "Price-Output Determination under Different Market Forms", p.20_
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