Monopolistic competition in an industry results in:
A)overutilization of plants.
B)chronic excess capacity.
C)less advertising than in perfect competition.
D)lower prices than in perfect competition.

Question

Quizplus · Accepted Answer

Monopolistic competition leads to firms having some degree of market power, which results in excess capacity as firms may not produce at full capacity to maintain their market power through differentiation. This means that firms may produce less than the minimum efficient scale leading to higher costs and inefficiencies. Therefore, chronic excess capacity is a characteristic of industries that have monopolistic competition.

Monopolistic Competition in an Industry Results In