Monopolistic Competition Is Defined as a Type of Market Structure

question 51

Multiple Choice

Monopolistic competition is defined as a type of market structure in which

• A) many firms produce the good.
• B) firms produce a homogeneous good.
• C) there are barriers to entry.
• D) firms can make an economic profit in the long run.
• E) firms can easily enter the market but cannot easily exit from it.

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Definitions:

Externality

A consequence of an economic activity that is experienced by unrelated third parties.

Externalities

Economic impacts on bystanders not directly engaged, with potential for both positive and negative outcomes.

Transaction Costs

The expenses incurred when buying or selling goods and services, which can include fees, commissions, and the costs of the time and effort involved in making the transaction.

Coase Theorem

A principle stating that if trade in an externality is possible and there are no transaction costs, bargaining will lead to an efficient outcome regardless of the initial allocation of property rights.