Final answer:
Monopolistic competition is a market structure characterized by many firms selling differentiated products. The key characteristic of monopolistic competition is the presence of substitutable products.
Step-by-step explanation:
A key characteristic of monopolistic competition is the presence of differentiated products. This market structure is characterized by many firms that supply products that are similar yet not identical, which are seen as substitutes but not perfect replacements for one another.
Monopolistic competition is a market structure characterized by many firms selling differentiated products. In monopolistic competition, there are few sellers rather than just one seller like in a monopoly. This means that there is more than one seller competing with each other in the market.
Additionally, one of the key characteristics of monopolistic competition is the presence of substitutable products. This means that although the products offered by different firms might be similar, they have some unique characteristics that differentiate them from each other and make them substitutes for one another.
Therefore, the correct key characteristic of monopolistic competition from the given options is 2) Substitutable products.