True or false:

On the Upper West Side of Manhattan, there are hundreds of independent restaurants offering different specialties, services, and prices. The market for restaurants in this neighborhood is in a state of monopolistic competition.

True

Explanation:

Monopolistic competition is a form of competition involving an industry in which products and services offered are similar but not perfect substitutes. This type of industry, is familiarized with customers in their everyday lives.

Monopolistic competition has characteristics between perfect competition and monopoly and firms involved have similar degrees of market power. Firms in this industry are also price makers as producers in this type of industry, have control over the pricing of their goods and services.

Demand is subject to changes in price, indicating that demand is highly elastic in monopolistic competition. Entry and exit barriers are low in a monopolistic competitive industry and decisions made by one firm, does not directly affect the decisions of its competitors.

Restaurants, hair salons, cleaning products are examples in this type of industry.