What characteristic of monopolistic competition may help to offset the inefficiency of this market structure?
A) Free entry and exit imply that firms produce at minimum long-run average cost.
B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products.
C) Consumers may feel better about the inefficiency if they know that firms earn zero profits.
D) Consumers may prefer this outcome to monopoly or monopsony.

Question

Quizplus · Accepted Answer

The characteristic of product differentiation in monopolistic competition can lead to consumer satisfaction from having a variety of choices. This can offset the market inefficiency as consumers place value on the uniqueness of the products.

What Characteristic of Monopolistic Competition May Help to Offset the Inefficiency