Which one of the following is a typical example of monopolistic competition?

Monopolistic competition is a market structure characterized by a large number of sellers offering differentiated products that are close substitutes. The market for soaps is a classic example because, while many brands exist (Lux, Dove, Pears), they differentiate themselves through branding, packaging, and perceived quality, allowing firms some control over pricing. In contrast, retail vegetable markets often resemble perfect competition due to product homogeneity [1]. Indian Railways is a natural monopoly where a single entity controls the entire supply. The labor market for software engineers represents a factor market, which can exhibit characteristics of perfect competition or oligopsony depending on the region. Monopolistic competition requires free entry and exit , and product differentiation is the key factor that distinguishes it from the homogenous products found in perfectly competitive environments [1]. Therefore, the soap industry perfectly illustrates these competitive yet distinct market dynamics.

Sources

1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 4: The Theory of the Firm under Perfect Competition > 4.1 PERFECT COMPETITION: DEFINING FEATURES > p. 53