Which statement most accurately reflects the market outcome in monopolistic competition?

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Monopolistic competition features an excessive number of firms, each producing a somewhat differentiated product at a scale smaller than ideal.In monopolistic competition, there are too few firms, and each produces a slightly varied product at a scale larger than optimal.Monopolistic competition has the perfect number of firms, with each producing a slightly differentiated product at an optimal scale.There are too many firms in monopolistic competition, each manufacturing a slightly different product at the optimal scale.Monopolistic competition consists of a limited number of firms producing identical products at a suboptimal scale.

Explanation

In monopolistic competition, the market tends to have fewer firms than the socially optimal number, causing each firm to operate at a scale larger than what would be ideal for efficiency. This results from product differentiation and market power, leading to excess capacity.