Monopolistically competitive markets and perfectly competitive markets share some similarities but differ in a number of ways. One such difference between the two is that monopolistically competitive firms _____.

Question

feature homogeneous products
feature differentiated products
face some barriers to entry
face no barriers to entry

Answer 1

Monopolistically competitive firms feature differentiated products.

In contrast, perfectly competitive markets feature homogeneous products, where all firms sell an identical product. Additionally, both market structures typically face little to no barriers to entry, but monopolistic competition is characterized by the product differentiation aspect.