Which of the following is NOT a characteristic of monopolistic competition?

• A. There is free entry and exit in the market
• B. Firms sell identical products with no differentiation
• C. There are many sellers in the market
• D. Firms have some control over price due to product differentiation

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the definition of monopolistic competition. It is a market structure characterized by many sellers, free entry and exit, and product differentiation, where each firm has some control over its price.
2. Step 2: Identify the key characteristics of monopolistic competition: (a) many sellers, (b) free entry and exit, (c) product differentiation, and (d) some control over price.
3. Step 3: Analyze each option given in the problem to see if it matches these characteristics.
4. Step 4: Recognize that the statement 'Firms sell identical products with no differentiation' contradicts the characteristic of product differentiation, which is essential in monopolistic competition.
5. Step 5: Conclude that the option stating 'Firms sell identical products with no differentiation' is NOT a characteristic of monopolistic competition.