Which of the following factors signify monopolistic competition ? 1. Differentiated products 2. Large number of buyers and sellers 3. Barriers to entry 4. Homogeneous products Select the correct answer using the code given below :

Monopolistic competition is a market structure characterized by a large number of buyers and sellers [2]. Unlike perfect competition, where products are identical, firms in monopolistic competition offer differentiated products that are similar but not identical, often distinguished through branding, quality, or marketing. This differentiation grants firms a degree of market power over their pricing. A key feature of this structure is the freedom of entry and exit, meaning there are low or no significant barriers to entry, which distinguishes it from monopolies or oligopolies. In contrast, homogeneous products are a defining characteristic of perfect competition, and high barriers to entry are typical of monopolies or oligopolies. Therefore, only differentiated products (1) and a large number of buyers and sellers (2) signify monopolistic competition.

Sources

1. [2] Microeconomics (NCERT class XII 2025 ed.) > Chapter 4: The Theory of the Firm under Perfect Competition > 4.1 PERFECT COMPETITION: DEFINING FEATURES > p. 53