Which characteristic best describes monopolistic competition?

Monopolistic competition is characterized by a market structure where numerous firms compete by selling products that are differentiated from one another, rather than being identical. This differentiation can be based on quality, features, branding, or customer service, which allows firms to have some degree of market power to set prices above marginal cost.

Additionally, the market has low barriers to entry, meaning that new firms can easily enter the market to compete with established firms. This characteristic fosters competition and innovation, as firms continuously seek to attract customers with their unique product offerings.

The combination of free entry and differentiated products creates a dynamic market environment where consumers benefit from a variety of choices, while firms must constantly adapt to consumer preferences and competitive pressures.