What describes monopolistic competition?

Monopolistic competition is characterized by the presence of many firms that offer differentiated products. This means that while there are multiple sellers in the market, each firm provides a product that, although similar to that of its competitors, has unique features or branding that distinguishes it. This differentiation allows firms to have some degree of market power, as consumers may prefer one product over another based on their unique attributes.

In contrast, the other responses describe different market structures. The presence of many firms with homogeneous products aligns more with perfect competition, where products are indistinguishable from one another. A scenario where one firm dominates the entire market describes a monopoly, indicating a single seller with significant control over market prices. Lastly, a market with only a few sellers describes an oligopoly, where firms are interdependent and competition is based on several factors, including price, products, and marketing. Thus, the distinction of many firms with differentiated products is what suitably defines monopolistic competition.