Monopolistically competitive firms have no benefits to consumers relative to perfectly competitive firms.

Question

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Monopolistically competitive firms differentiate their products through branding, packaging, and other non-price factors, which can offer a perceived benefit to consumers. In addition, they may provide a wider variety of products or services than perfectly competitive firms. However, they may also have higher prices due to their market power, which reduces the overall benefit to consumers.

Monopolistically Competitive Firms Have No Benefits to Consumers Relative to Perfectly