Question

Which of the following statements is not correct? a. Monopolistic competition is similar to monopoly because in each market structure the firm can charge a price above marginal costs. b. Monopolistic competition is similar to perfect competition because both market structures are characterized by free entry. c. Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry. d. Monopolistic competition is similar to perfect competition because both market structures are characterized by many sellers.

Answer 1

Monopolistic competition is similar to oligopoly because both market structures are characterized by barriers to entry.

Step-by-step explanation:

Monopolistic competition can be defined as a type of imperfect competition in which different companies produce similar products, but not absolutely identical. These products differ from each other by their quality and packaging. In monopolistic competition each company set the prices of their product based on the different costs incurred during production.

Oligopoly can be described as a market structure with a low number of different organisations. In oligopoly each firm has to right to influence the price of their products inorder to maximise profit.

Monopolistic competition and oligopoly market structure share a similar characteristic which is the barrier to entry.