Monopolistic competition resembles pure competition because:

• A. firms are price takers
• B. there are only a few firms in the industry
• C. firms have relatively easy entry and exit from the market
• D. products are identical across all firms

Answer: (C)

Verified step by step guidance

1. Understand the characteristics of monopolistic competition: many firms, differentiated products, and relatively easy entry and exit from the market.
2. Recall the characteristics of pure competition: many firms, identical products, and free entry and exit.
3. Compare the two market structures to identify similarities and differences, focusing on the nature of products and market entry conditions.
4. Recognize that while monopolistic competition involves product differentiation (unlike pure competition), both share the feature of relatively easy entry and exit.
5. Conclude that the resemblance between monopolistic competition and pure competition lies in the ease of entry and exit, not in price-taking behavior or product homogeneity.