Final answer:
The correct answer is 'C. many small buyers and sellers,' which highlights the presence of multiple participants in the market in a monopolistic competition scenario, where there are low barriers to entry and producers offer differentiated yet substitutable products.
Step-by-step explanation:
The characteristic of monopolistic competition that is correct in the context of the provided options is: many small buyers and sellers. Monopolistic competition is a market structure characterized by many producers supplying similar but varied products with few barriers to entry to the market. Unlike monopoly, where high barriers to entry prevent new competitors from entering the market, monopolistic competition allows for relatively easy market entry and exit.
In monopolistic competition, firms offer products that are different from one another in some way, for example, through branding or quality, giving them some degree of price-setting power. However, because there are many similar substitutes available, the market resembles perfect competition in that no single firm can dictate market terms. The availability of perfect information and the fact that many small buyers and sellers exist are important features that distinguish monopolistic competition from other market structures such as oligopoly and monopoly.