Why might a company that produces jeans be considered both monopolistic and competitive in the market?

• A. It can freely enter and exit the market without any barriers.
• B. It operates in a perfectly competitive market where all firms sell identical products.
• C. It is the only producer of jeans in the entire market, with no close substitutes.
• D. It has some control over the price due to brand differentiation, but still faces competition from other jean manufacturers.

Answer: (D)

Verified step by step guidance

1. Step 1: Understand the characteristics of a perfectly competitive market, where many firms sell identical products, and firms are price takers with no control over the market price.
2. Step 2: Understand the characteristics of a monopolistic competition market, where many firms sell similar but differentiated products, giving each firm some control over its price due to brand loyalty or product differences.
3. Step 3: Analyze the jeans market: although many companies produce jeans (indicating competition), each company differentiates its product through branding, style, quality, or marketing, which gives them some price-setting power.
4. Step 4: Recognize that because there are no significant barriers to entry or exit, new firms can enter the jeans market, maintaining competition and preventing any single firm from becoming a pure monopoly.
5. Step 5: Conclude that a jeans producer is considered both monopolistic and competitive because it has some control over price due to product differentiation (monopolistic competition) but still faces competition from many other producers, preventing monopoly power.