2. You must determine which of two types of market structure better describes an industry, but you are allowed to ask only one question about the industry. What question should you ask to determine if an industry is:
Perfectly competitive or monopolistically competitive?
Perfectly competitive industries and monopolistically competitive industries both have many sellers. So it may be hard to distinguish between them solely in terms of number of firms. And in both market structures, there is free entry into and exit from the industry in the long run. But in a perfectly competitive industry, one standardized product is sold; in a monopolistically competitive industry, products are differentiated. So you should ask whether products are differentiated in the industry.
A monopoly or monopolistically competitive?
In a monopoly there is only one firm, but a monopolistically competitive industry contains many firms. So you should ask whether or not there is a single firm in the industry.