Question

Which of the following statements are true?

1. Monopolistically competitive markets have high selling costs.
2. Monopolistically competitive markets sell homogeneous goods.
3. Any firm can start a business in a monopolistically competitive market.

Options

• only (i)

• Only (i) and (ii)

• Only (i) and (iii)

• All of these

Answer 1

Only (i) and (iii)

Explanation:

• Statement (i): Goods are substantially distinctive (by branding, quality, or design); enterprises must spend heavily on advertising and promotions (selling expenses) to draw consumers away from rivals.
• Statement (iii): There is freedom of entry and exit in this market system, meaning any new firm can start a business without experiencing severe economic or legal barriers.