Consider a market structure where the number of firms is large, there is free entry and exit of firms, but the goods produced by them are not homogeneous. Such a market structure is called ______.
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Correct answer: D
Explanation
The correct answer is option 4 i.e. monopolistic competition.
A market structure consisting of many firms, free movement within and between firms, and a heterogeneous range of goods produced by these firms. We call this type of market structure monopolistic competition.
- A market structure known as monopolistic competition blends aspects of perfect and monopoly competition.
- A monopoly is a market structure where a single seller dominates the entire market, controlling the supply of a unique product with no close substitutes.
- Oligopoly is a market structure characterised by a small number of large firms that dominate the market.
- Monopsony refers to a market where there is a single buyer that controls the demand for a particular product or service.