ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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collusion
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profit maximization
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product differentiation
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imperfect competition
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Detailed explanation-1: -The characteristic that distinguishes monopolistic competition from perfect competition is differentiated products; each firm is a price setter and thus faces a downward-sloping demand curve. Short-run equilibrium for a monopolistically competitive firm is identical to that of a monopoly firm.
Detailed explanation-2: -Product differentiation is the key feature of monopolistic competition, where products are marketed by quality or brand. Demand is highly elastic, and any change in pricing can cause demand to shift from one competitor to another.
Detailed explanation-3: -In monopolistic competition, there is much nonprice competition, such as advertising, trademarks, and brand names. In pure competition, there is no nonprice competition.
Detailed explanation-4: -Hence, product differentiation is a feature of monopolistic competition.