Which of the following is not a characteristic of monopolistic competition?

a) The market is fragmented.

b) There is free entry and exit.

c) In the long-run equilibrium, firms earn positive profits.

d) Firms produce horizontally differentiated products.

Question

Business

Ian Adams

1 January, 02:40

Which of the following is not a characteristic of monopolistic competition?

a) The market is fragmented.

b) There is free entry and exit.

c) In the long-run equilibrium, firms earn positive profits.

d) Firms produce horizontally differentiated products.

+1

Answers (1)

Know the Answer?

Ellie Blevins · Answer 1

The correct answer is option c.

Explanation:

Monopolistic competition is a market structure where there is a large number of sellers producing differentiated products. The market is fragmented because of product differentiation.

The entry and exit in the market are relatively easy with no or very low restrictions. Because of free entry and exit, the firms can earn positive profits only in the short run.

In the long run, other potential firms enter the market increasing the market supply and reducing the profit and price level. So firms can earn only normal profits in the long run.

Which of the following is not a characteristic of monopolistic competition?a) The market is fragmented.b) There is free entry and exit.c) In the long-run equilibrium, firms earn positive profits.d) Firms produce horizontally differentiated products.

Which of the following is not a characteristic of monopolistic competition?

a) The market is fragmented.

b) There is free entry and exit.

c) In the long-run equilibrium, firms earn positive profits.

d) Firms produce horizontally differentiated products.