Monopolistic competition is characterized by many sellers offering differentiated products. While the provided answer key selects 'Few sellers', this is technically a feature of oligopoly. In monopolistic competition, there are many firms, and entry/exit is relatively easy. Given the constraint to keep the answer key, it is noted that this classification may conflict with standard economic theory regarding market structures.

In the long run, a firm under monopolistic competition earns only normal profits. The equilibrium condition is where Marginal Revenue (MR) equals Marginal Cost (MC), and the Price (which equals Average Revenue, AR) is equal to Average Cost (AC). Since the options provided do not accurately reflect this specific condition, 'None of these' is the correct choice.

The kinked demand curve model assumes that if an oligopolist raises their price, rivals will not follow, causing a loss in market share. Conversely, if the oligopolist lowers their price, rivals will match the price cut to protect their own market share. This asymmetry creates a 'kink' at the current market price.

In perfect competition, 'smallness' refers to market power rather than physical size or asset value. A firm is considered small if its individual production volume is such a negligible fraction of total market supply that any change in its output level has no perceptible impact on the prevailing market equilibrium price. Thus, the firm acts as a price taker.

Price discrimination is impossible under perfect competition because all firms are price takers and products are homogeneous. If a seller attempted to charge different prices, consumers would immediately switch to other sellers offering the lower market price. Perfect information and the absence of barriers ensure that a single market price prevails, preventing any individual firm from segmenting the market to extract different prices.

In a capitalist economy, the principle of 'consumer sovereignty' prevails. Because production is driven by market demand and competition, businesses must cater to consumer preferences to survive, effectively giving the consumer the power to dictate what is produced.

A monopolist earns abnormal (supernormal) profits when the price charged for the product exceeds the average total cost of production. Since the monopolist is the sole supplier, they can maintain this price above cost in the long run, unlike firms in perfect competition where such profits would be eroded by new entrants.

Product differentiation is the defining feature of monopolistic competition. In this market structure, numerous firms compete by offering products that are close substitutes but are distinguished by branding, quality, or features, allowing firms some degree of control over pricing.

While China is often described as a 'socialist market economy,' in many academic contexts, it is categorized under capitalist frameworks due to its extensive private sector, market-driven pricing, and integration into global trade. Note: This classification is subject to debate, as China maintains strong state control, but the provided answer key identifies it as capitalism.

Lerner's index measures the degree of monopoly power as the inverse of the price elasticity of demand (1/|Ed|). It represents the markup of price over marginal cost as a percentage of price. While (P-MC)/P is the definition, the index is mathematically equivalent to the reciprocal of the absolute value of price elasticity of demand at the profit-maximizing level of output.