Question:
Consider the statements about monopolistic competition: A. Firms faces downward sloping demand curve, B. Excess capacity is a long run property, C. Firm is price taker, D. Product differentiations is essential in this market, E. Selling costs are significant.
Consider the statements about monopolistic competition: A. Firms faces downward sloping demand curve, B. Excess capacity is a long run property, C. Firm is price taker, D. Product differentiations is essential in this market, E. Selling costs are significant.
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Monopolistic competition has product differentiation, selling cost, downward sloping demand and excess capacity. Firms are not price takers.
Updated On: May 22, 2026
- A, B, D, E Only
- A, B, C, D Only
- A, B, D Only
- A, B, C, D, E
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The Correct Option is A
Solution and Explanation
Concept: Monopolistic competition is a market structure with many firms, differentiated products, selling costs and some control over price.
Step 1: Check statement A.
Firms face downward sloping demand curve because products are differentiated. \[ A = \text{Correct} \]
Step 2: Check statement B.
Excess capacity is a long-run property of monopolistic competition. \[ B = \text{Correct} \]
Step 3: Check statement C.
A firm is not a price taker. It has some control over price. \[ C = \text{Incorrect} \]
Step 4: Check statement D.
Product differentiation is essential in monopolistic competition. \[ D = \text{Correct} \]
Step 5: Check statement E.
Selling costs are significant because firms advertise to differentiate products. \[ E = \text{Correct} \] Thus, correct statements are: \[ A, B, D, E \]
Step 1: Check statement A.
Firms face downward sloping demand curve because products are differentiated. \[ A = \text{Correct} \]
Step 2: Check statement B.
Excess capacity is a long-run property of monopolistic competition. \[ B = \text{Correct} \]
Step 3: Check statement C.
A firm is not a price taker. It has some control over price. \[ C = \text{Incorrect} \]
Step 4: Check statement D.
Product differentiation is essential in monopolistic competition. \[ D = \text{Correct} \]
Step 5: Check statement E.
Selling costs are significant because firms advertise to differentiate products. \[ E = \text{Correct} \] Thus, correct statements are: \[ A, B, D, E \]
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