The correct answer is: B. Differentiated product
Perfect competition and monopolistic competition are two types of market structures. In perfect competition, there are many firms selling a homogeneous product, and firms can freely enter and exit the market. In monopolistic competition, there are many firms selling a differentiated product, and firms can also freely enter and exit the market.
The major difference between perfect competition and monopolistic competition is that firms in monopolistic competition can differentiate their products, while firms in perfect competition cannot. This means that firms in monopolistic competition have some control over price, while firms in perfect competition do not.
Option A: Number of firms. Both perfect competition and monopolistic competition have many firms.
Option B: Differentiated product. Only monopolistic competition has differentiated products.
Option C: Rate of profit. Both perfect competition and monopolistic competition can earn a normal profit in the long run.
Option D: Free exit and entry. Both perfect competition and monopolistic competition have free entry and exit.