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The primary difference between perfect and monopolistic competition is that for monopolistic competition a
The primary difference between perfect and monopolistic competition is that for monopolistic competition
a. there is product differentiation.
b. entry is difficult.
c. a large number of sellers exists.
d. consumers have perfect information with respect to prices.
Expert Solution
The correct answer is a. there is product differentiation.
A perfectly competitive market is a market where there are many suppliers who sell similar goods and services. The products in this market can be a perfect substitute for each other. On the other hand, monopolistic competition refers to a market where many suppliers sell products that are slightly different from each other. The major difference between a perfectly competitive market and a monopolistic competitive market is product differentiation. There is product differentiation in a monopolistic competitive market, but in perfect competition, goods are identical. Product differentiation refers to an aspect that makes a product different from the others in the market.
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