Question

One critical characteristic of a monopolistic competition is

Answer 1

One critical characteristic of a monopolistic competition is differentiated products i.e the firms sells products that might be similar but are differentiated in some way or the other. Unlike the perfectly competitive firms they do not sell homogenous products. For example, firms in a monopolistic competition may sell toothpastes but their names, branding, packaging will be different. This is one key characteristic of monopolistic competition.

Another characteristic is that like perfectly competitive firms, no single firm is able to influence the price in the market which means that the firms are price takers unlike a monopoly.