Which condition is present in pure (perfect) competition but missing in monopolistic competition?

• A. Free entry and exit
• B. Homogeneous products
• C. Firms are price makers
• D. Many buyers and sellers

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the characteristics of pure (perfect) competition. These include many buyers and sellers, homogeneous products, free entry and exit, and firms being price takers.
2. Step 2: Understand the characteristics of monopolistic competition. These include many buyers and sellers, differentiated (heterogeneous) products, free entry and exit, and firms having some price-making power.
3. Step 3: Compare the two market structures to identify which condition is present in pure competition but missing in monopolistic competition.
4. Step 4: Note that both market structures have many buyers and sellers and free entry and exit, so these conditions are common to both.
5. Step 5: Recognize that the key difference is in the product type: pure competition has homogeneous products, while monopolistic competition has differentiated products. Therefore, the condition present in pure competition but missing in monopolistic competition is homogeneous products.