In monopolistic competition, in which way do producers typically try to differentiate themselves from their competitors?

• A. By offering products with unique features or branding
• B. By setting prices equal to marginal cost
• C. By forming cartels to control market supply
• D. By producing identical, standardized goods

Answer: (A)

Verified step by step guidance

1. Understand the nature of monopolistic competition: it is a market structure characterized by many producers selling products that are similar but not identical.
2. Recognize that in monopolistic competition, firms have some degree of market power because their products are differentiated from those of competitors.
3. Identify the common methods of product differentiation, which include unique features, branding, quality variations, or customer service enhancements.
4. Recall that setting prices equal to marginal cost is typical of perfect competition, not monopolistic competition, and forming cartels is associated with oligopoly, not monopolistic competition.
5. Conclude that producers in monopolistic competition typically try to differentiate themselves by offering products with unique features or branding to attract customers and gain market power.