What characteristics define monopolistic competition?

• A. Many firms, free entry and exit, differentiated products, and some degree of market power with a downward‑sloping demand for each firm.
• B. A single firm with a unique product, high barriers to entry, and strong price-setting power.
• C. Many firms, homogeneous products, price-taking behavior, and no advertising or product variation.
• D. A few large firms, interdependent pricing decisions, potential for collusion, and significant barriers to entry.

Answer: (A)