Learning Path
Question & Answer1
Understand Question2
Review Options3
Learn Explanation4
Explore TopicChoose the Best Answer
A
Price-setting behavior
B
Constant returns to scale
C
Perfect information
D
Homogeneous products
Understanding the Answer
Let's break down why this is correct
Answer
Perfect competition is a market structure where many firms sell identical products, and each firm must accept the market price, meaning they are price takers. In contrast, monopolistic competition features many firms as well, but each firm sells slightly different products, allowing them some control over their prices. This means that firms in monopolistic competition are price makers; they can set their prices based on how they differentiate their products from others. For example, a local coffee shop might charge more for its unique blend compared to a larger chain because it offers something special that customers want. This ability to influence prices is a key difference between perfect competition and monopolistic competition.
Detailed Explanation
In monopolistic competition, companies can set their own prices. Other options are incorrect because This idea means that increasing production doesn't change costs much; Perfect information means everyone knows everything about the market.
Key Concepts
Market Structures
Profit Maximization
Pricing Strategies
Topic
Market Structures and Profit Maximization
Difficulty
easy level question
Cognitive Level
understand
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