ACCA Applied Knowledge · Business and Technology · Competitive factors
A market has many sellers, each offering a slightly different product such as restaurants in a city centre. Each firm has some control over its own price because customers perceive differences, and firms can enter or leave the market freely. Which market structure does this describe?
This is monopolistic competition: many firms sell differentiated products, giving each some pricing power, while entry and exit are easy. Perfect competition would need identical products, oligopoly would involve a few dominant firms, and monopoly would have a single seller.
- APerfect competition
- BMonopolistic competitionCorrect
- COligopoly
- DMonopoly
Explanation
Many sellers, differentiated products, some price-setting power and free entry and exit are the features of monopolistic competition. Perfect competition requires identical products and price-taking firms. Oligopoly has few dominant firms and barriers to entry.
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