Q.In monopolistic competition, the essential feature is ....

The essential feature of monopolistic competition is selling cost (advertising/promotion) — option (b).

Monopolistic competition (Chamberlin) is a market with many sellers whose products are close substitutes but differentiated by brand, quality, packaging or design. Because products are differentiated rather than identical, each firm must persuade buyers to prefer its brand, and does so through advertising, publicity and sales promotion. The expenditure on these activities is selling cost — a feature that does not exist in perfect competition (where the product is homogeneous and price is given).

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Product differentiation is a feature of monopolistic competition.

Monopolistic competition is a market with a large number of sellers who sell products that are close substitutes but not identical — they differ in brand, quality, packaging or design. This product differentiation gives each firm some limited control over price. 'One seller' describes monopoly, 'few sellers' describes oligopoly, and 'no entry' is a barrie …