The correct answer is: B. in monopolistic competition, firms can differentiate their products.
Monopolistic competition is a market structure in which there are many firms selling similar but differentiated products. This means that each firm has some control over its price, but it also faces competition from other firms selling similar products.
In perfect competition, there are many firms selling identical products. This means that each firm has no control over its price, and it must accept the market price.
The key difference between monopolistic competition and perfect competition is that firms in monopolistic competition can differentiate their products. This means that they can create products that are perceived by consumers to be different from the products of other firms. This allows firms in monopolistic competition to charge a price above the marginal cost of production.
The other options are incorrect because:
- In perfect competition, firms cannot differentiate their products. This is because all firms produce identical products.
- In monopolistic competition, there are relatively many firms. This is in contrast to perfect competition, in which there are many firms.
- In perfect competition, there are no barriers to entry. This means that it is easy for new firms to enter the market.