Question

A characteristic of monopolistic competition that is not present in any other market structure is that there

1is only one seller and that seller holds a high level of market power.

2are many sellers and each produces its own version of the product.

3are a small number of sellers who have market power.

4are many sellers that produce identical products.

Answer 1

Answer - 2. are many sellers and each produces its own version of the product.

One of the most important feature in monopolistic competition market is that firms sells differentiated products or commodities. Differentiated goods are those that are close substitutes to each other. The look like similar but they are not identical. There will be many number of sellers and the product they sell is close substitutes but identical. It otherwise means the sellers produce their own version of the product.

This characteristic of monopolistic competition market is not there in either perfect competition market of monopoly market. In perfect competition market there will be identical goods and in monopoly there will be a commodity that do not have any close substitute.

The other options are wrong why

Option - 1 - In monopolistic competition market there will be many sellers.

Option - 3 - There are many number of sellers who have market power.

Option - 4 - There will be many sellers selling differentiated products.