Which aspect of monopolistic competition gives consumers more choice? a. Producers rely on consumer decisions to succeed. b. Price is not an important factor. c. Few barriers to market entry exist. d. Producers are more concerned about selection than profits.
The Correct Answer and Explanation is:
Correct Answer: c. Few barriers to market entry exist.
Explanation:
Monopolistic competition is a market structure characterized by many sellers offering similar but not identical products. One of the key features that promotes consumer choice in this type of market is the existence of few barriers to entry. When it is relatively easy for new firms to enter the market, more businesses are likely to compete by introducing new products or variations of existing ones. This constant influx of new firms and products expands the range of choices available to consumers.
Each producer in monopolistic competition attempts to differentiate its product through branding, quality, features, or customer service. With many businesses vying for customer attention, innovation and variety become central strategies. This competitive environment encourages firms to cater to niche preferences, respond to trends quickly, and fill gaps in consumer demand, all of which enhance consumer choice.
Unlike in pure monopoly or oligopoly, where high barriers prevent new entrants, monopolistic competition supports a dynamic marketplace. Startups and small businesses can enter with relative ease, especially in sectors like retail, restaurants, and personal services. The ease of entry not only fosters variety but also keeps established firms attentive to customer needs, as consumers have the freedom to switch to new or better offerings.
The other options do not explain increased consumer choice as effectively. For example, while producers may consider consumer preferences (option a), this is true in many market structures. Price still plays a role in monopolistic competition (contrary to option b). Additionally, producers remain profit-driven (contrary to option d), although they compete by offering diverse selections.
Therefore, the characteristic of few barriers to entry plays the most direct and significant role in increasing consumer choice in a monopolistically competitive market.
