Which statement is TRUE?
A)Monopolistic competition and perfect competition are both inefficient.
B)Monopolistic competition is efficient because of product differentiation.
C)The inefficiency of monopolistic competition is arguably a small price to pay for the wide range of product choices it offers.
D)The inefficiency of monopolistic competition is a result of advertising expenses.

Question

Quizplus · Accepted Answer

Monopolistic competition may not be the most efficient market structure due to product differentiation resulting in excess capacity and higher prices, but it can provide consumers with a variety of products to choose from. Therefore, it can be argued that the inefficiency is a small price to pay for the benefits of product diversity.

Which Statement Is TRUE