In a monopolistic competitive market, a company might decide to ________ if only one competitor raises its prices.
A)reduce its production costs
B)reduce its marketing costs
C)maintain its current price and profit margin
D)increase its marketing budget to raise the perceived value of its product
E)increase its production costs to improve the quality of the product

Question

Quizplus · Accepted Answer

In a monopolistic competitive market, each company has control over the price it charges for its product. If one competitor raises its prices, the other companies can choose to maintain their current price and profit margin, which can attract more customers away from the higher priced competitor. This strategy can help the company gain a larger market share and increase its profit. Reducing production or marketing costs or increasing marketing budget or production costs may not necessarily be the best strategy in response to a competitor's price increase.

In a Monopolistic Competitive Market, a Company Might Decide to ________