Monopolistic competition means: A.) firms are in perfect competition but they co
ID: 1207283 • Letter: M
Question
Monopolistic competition means:
A.) firms are in perfect competition but they collude similar to monopolies B.) firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent C.) firms are in a monopoly but they compete D.) firms face a horizontal market demand
Similarily, the movie You’ve Got Mail features a successful small bookstore competing with a new book superstore around the block. The big superstore offers large discounts, while the small independent bookstore has better service and more knowledgeable staff. The movie best illustrates which of the following?
A.) The Meg Ryan character’s bookstore best illustrates a perfectly competitive firm B.) Small producers offer differentiated products and compete most effectively through product differentiation C.) The Tom Hanks character’s bookstore best illustrates a monopoly firm D.) Large producers offer differentiated products and compete most effectively through product differentiation E.) Small producers can’t compete based on costs.
Explanation / Answer
The correct answer is option (B). Monopolistic competition means firms differentiate their output, which makes them price-makers, but barriers to entry are low or non-existent.
The correct answer is option (A). The Meg Ryan character’s bookstore best illustrates a perfectly competitive firm