Question

Which of the following are the features of monopolistic competition? A. Large number of buyers and sellers
B. Product differentiation
C. Free entry and exit of firms
D. Homogeneous products
E. Selling costs

• A. A, B, C and E only
• B. A, C and D only
• C. B, C, D and E only
• D. A, B, D and E only

Hint:

Logic Tip: Product differentiation is the key feature distinguishing monopolistic competition from perfect competition.

Answer 1

The Correct Option is A

Step 1:
Monopolistic competition combines features of monopoly and perfect competition.

Step 2:
Important features are:
• Large number of buyers and sellers
• Product differentiation
• Free entry and exit
• Selling costs like advertisement

Step 3:
Homogeneous products are a feature of perfect competition, not monopolistic competition. Thus: \[ D = \text{Incorrect} \]

Step 4:
Correct features are: \[ A,\; B,\; C,\; E \] Hence, the correct answer is: \[ \boxed{\text{(1) A, B, C and E only}} \]