Who sets the price in a monopolistic competition? a. producers and consumers b. consumers only c. government d. producers only

A). producers and consumers

Explanation:

Monopolistic competition is a market structure in which there are a number of buyers and sellers all selling a slightly differentiated product (products that serve the same purpose). The sellers have some control over their prices but not complete control. Because the products are only slightly differentiated the price charged by the monopolist cannot be too high as then the consumers will switch to the other product.

Therefore, in a monopolistically competitive markets prices are set by producers and consumers.

The option (A) is correct. The price of monopolistic competition is set by producers and consumers.

Further Explanation:

Monopolistic Competition: This type of market has many sellers and consumers. The products are not homogeneous and not a perfect substitute for each other. The firms have to incur selling costs in order to differentiate their product. There are low barriers to exit and entry. In the monopolistic competition, the firm earns only normal profit like perfect completion in the long run. The characteristics of the monopolistic competition are:

•A large number of sellers and buyers

•to  Product

•Low barriers to exit and entry

•Selling Cost

•Imperfect information

•Independent making

Justification for the correct and incorrect

A.

Producers and consumers: This option is correct.

There is a large number of producers and consumers. The producers are selling heterogeneous products. The producers have little control over price means that their ability to set the price is neutralized by highly elastic demand for the product.

B.

Consumers only: This option is incorrect.  

The consumer does not have control over the price because the firms are selling differentiated products.

C.

Government: This option is incorrect.

If the government sets the price, then the market will become a government control monopoly.  

D.

Producers Only: This option is incorrect.

The producers do not have complete control over the price because the demand for the goods in the market is highly elastic.

Learn more:

1.Learn more about the demand and supply in the market

2.Learn more about the market price

3.Learn more about the competitive market

Answer details:

Grade: Middle School

Subject: Economics

Chapter: Business Markets

Keywords:  price in monopolistic competition, producers and consumers, consumers only,  government, producers only, type of market, business, economics.

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