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Question
Which of the following statements are true?
- Monopolistically competitive markets have high selling costs.
- Monopolistically competitive markets sell homogeneous goods.
- 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
MCQ
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Solution
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.
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