One way in which monopolistic competition and monopoly differ is that:

• A. Monopolistic competition firms produce identical products, whereas a monopoly produces differentiated products.
• B. Barriers to entry are low in monopoly but high in monopolistic competition.
• C. Firms in monopolistic competition face competition from many other firms, while a monopoly is the sole seller in its market.
• D. Monopolies have no control over price, while firms in monopolistic competition are price takers.

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the characteristics of monopolistic competition. Firms in monopolistic competition sell differentiated products and face many competitors, meaning each firm has some control over its price but still competes with many others.
2. Step 2: Understand the characteristics of a monopoly. A monopoly is the sole seller in the market with no close substitutes, giving it significant control over the price of its product.
3. Step 3: Analyze the given statements one by one to identify which correctly contrasts monopolistic competition and monopoly:
4. Step 4: Recognize that in monopolistic competition, products are differentiated (not identical), and there are low barriers to entry, while in monopoly, there is only one firm with high barriers to entry.
5. Step 5: Conclude that the correct distinction is that firms in monopolistic competition face competition from many other firms, whereas a monopoly is the sole seller in its market, which aligns with the fundamental definitions of these market structures.