Because consumers value product variety,

Question

Quizplus · Accepted Answer

Monopolistic competition involves firms producing similar but not identical products. As consumers value product variety, firms in monopolistic competition try to differentiate their products by adding unique features, branding, or marketing strategies. This creates a slight degree of market power for each firm, leading to higher prices and some inefficiency. However, the inefficiency is partially offset by the added consumer surplus resulting from the greater product variety. Therefore, B is the correct choice. Neither A, C, D, nor E is correct because they do not accurately describe the characteristics of monopolistic competition.

Because Consumers Value Product Variety