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

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

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the definition of monopolistic competition. It is a market structure characterized by many firms selling products that are similar but not identical, allowing for product differentiation.
2. Step 2: Identify the key characteristics of monopolistic competition: (a) many sellers, (b) product differentiation giving firms some control over price, and (c) free entry and exit in the market.
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 concept 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 basic characteristic of monopolistic competition.