Which of the following statements best describes firms under monopolistic competition?

• A. Firms are price takers and sell identical products.
• B. Firms operate as a single seller with no close substitutes for their product.
• C. There are significant barriers to entry, preventing new firms from entering the market.
• D. Firms sell differentiated products and have some control over price.

Answer: (D)

Verified step by step guidance

1. Understand the characteristics of different market structures: perfect competition, monopoly, monopolistic competition, and oligopoly.
2. Recall that in perfect competition, firms are price takers and sell identical products, which does not apply to monopolistic competition.
3. Recognize that a monopoly is a single seller with no close substitutes and significant barriers to entry, which also does not describe monopolistic competition.
4. Identify that monopolistic competition involves many firms selling differentiated products, giving each firm some control over its price.
5. Conclude that the best description of firms under monopolistic competition is that they sell differentiated products and have some control over price.