5. In a monopolistically competitive market:
A. there is a relatively small number of sellers.
B. all products are identical.
C. it is typically difficult to enter the market.
D. there is a relatively large number of sellers.

Question

5.    In a monopolistically competitive market: 
A.    there is a relatively small number of sellers.
B.    all products are identical.
C.    it is typically difficult to enter the market.
D.    there is a relatively large number of sellers.

BlackTom AI · Accepted Answer

To begin, let’s recall the key characteristics of a monopolistically competitive market: many sellers, differentiated products, freedom of entry and exit, and some degree of market power for each firm due to product differentiation.
Option A: 'there is a relatively small number of sellers.' This describes an oligopoly or a monopoly more than a monopolistically competitive market. In monopolistic competition, the number of sellers is large, not small, so this statement is inaccurate.
Option B: 'all products are identical.' That would align with perfect competition or a pure commodity market. In monopolistic competition, products are differentiated, so claiming all products are identical misrepresents the typical product landscape.
Option C: 'it is typically difficult to enter the market.' A hallmark of monopolistic competition is easy entry and exit, which allows new firms to enter when profits are present and exit when profits vanish. Therefore, saying entry is difficult is incorrect.
Option D: 'there is a relatively large number of sellers.' This matches the standard description of monopolistic competition: many firms competing with differentiated products and relatively low barriers to entry. Hence this statement is correct.
In summary, options A, B, and C misstate core features of monopolistic competition, while option D accurately reflects the market structure by emphasizing the large number of sellers and the surrounding implications for competition and product variety.

5. In a monopolistically competitive market: A. there is a relatively small number of sellers. B. all products are identical. C. it is typically difficult to enter the market. D. there is a relatively large number of sellers.

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