The correct answer is 1 and 2 only.Monopolistic competitionIt is a type of imperfect competition in which many firms offer products and services that are similar to each other but are not perfect substitutes.In a monopolistic competitive market:Many firms sell differentiated products. Hence, Statement 1 is correct.Differentiated products can arise from characteristics of the good or service, the location from which the firm sells the product, intangible aspects of the product, and perceptions of the product.All firms have the same but a relatively low degree of market power.There are many firms offering similar but not identical products. Hence, Statement 4 is not correct.There is easy entry and exit of firms in the market. Hence, Statement 3 is not correct.These firms have little power to set short supply and raise prices to increase profit.The firms are small relative to the total market as there are many firms present providing goods and services in the market.Heavy advertisement and marketing are done by the firms in this market.A large number of buyers and sellers. Hence, Statement 2 is correct.