Market with Characteristic of Product Differentiation

Explanation:

Product differentiation is a marketing strategy in which a company tries to distinguish its product or service from competitors by adding features or characteristics that make it unique. This strategy is mostly used in monopolistic competition, where there are many firms in the market and each firm is trying to differentiate its product to attract customers.

Monopolistic Competition

Monopolistic competition is a market structure in which there are many firms selling a differentiated product. The firms have some control over the price of the product, but the competition is still high as the products are close substitutes. In monopolistic competition, firms can differentiate their products based on quality, design, features, branding, packaging, and advertising.

For example, in the market for smartphones, there are many firms that sell smartphones with different features, designs, and brands. Each firm tries to differentiate its product to attract customers. Apple, Samsung, and Huawei are some of the popular brands that sell smartphones with different features and designs.

In monopolistic competition, firms can charge a slightly higher price for their differentiated product as customers may be willing to pay extra for the unique features. However, if the price is too high, customers may switch to a substitute product.

Conclusion

Therefore, the correct answer to the question is option 'C', Monopolistic Competition, as it is the market structure that has the characteristic of product differentiation.

There is freedom to enter or leave the market, as there are no major barriers to entry or exit. A central feature of monopolistic competition is that products are differentiated. ... Physical product differentiation, where firms use size, design, colour, shape, performance, and features to make their products different.