In a monopolistically competitive market like restaurants, large capital-intensive firms like McDonald's may co-exist with more labor-intensive mom-and-pop shops. In this case, higher labor costs would tend to favor the survival of

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Higher labor costs would tend to favor the survival of large-scale capital-intensive firms more than small firms because large firms, like McDonald's, can spread their higher labor costs over a larger volume of sales and can also substitute capital for labor more easily than smaller, labor-intensive firms.

In a Monopolistically Competitive Market Like Restaurants, Large Capital-Intensive Firms