Economic analysis of a monopolistically competitive industry is more complicated than that of pure

competition because:

A) the number of firms in the industry is larger.

B) monopolistically competitive firms cannot realize an economic profit in the long run.

C) of product differentiation and consequent product promotion activities.

D) monopolistically competitive producers use strategic pricing strategies to combat rivals.

The correct answer to the given question is C) product differentiation and consequent product promotion activities.

Explanation:

Monopolistic competition is that form of market where there are large number of buyers and sellers, barriers to entry are very weak or non existent. Here the firms are price makers, as the firms here sell differentiated products, they use various types of promotional techniques to influence consumers to make buying decision.

Pure competition or perfect competition is that form of market where there are large number of buyers and sellers, and the barriers to entry are also weak or low. Here the firms are price takers because they all sell same homogeneous products, therefore the price of a product would be equal every where in the market.

So from the above information regarding monopolistic and perfect competition it is quite clear that economic analysis of a firm or industry in monopolistic would be much more complex than pure play market because in monopolistic competition market, firms are selling differentiated products and they are using various promotional activities to sell their products.