Question

Suppose there is a relatively large number of firms, a high degree of product differentiation, and free entry. What market structure is most likely to form?

a. Either a monopolistic or competitive market.
b. A competitive market.
c. A monopolistically competitive market.
d. An oligopolistic market.

Answer 1

The correct answer is option c.

Step-by-step explanation:

A monopolistic market is characterized by a large number of sellers, a high degree of product differentiation and a little restriction on entry and exit.

While in a perfect market there is a large number of firms, homogenous products and no barriers to entry and exit.

An oligopolistic market has few firms which are interdependent.

The characteristics mentioned in the question is most likely to form a monopolistically competitive market.