Monopolistic competition within 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 results in product differentiation and non-price competition, leading to firms operating with excess capacity in order to maintain their differentiated products. This results in chronic excess capacity within the industry. Option A is incorrect because overutilization of plants would suggest that there is not enough capacity, which would lead to perfect competition. Option C is incorrect because firms in monopolistic competition tend to invest more in advertising to differentiate themselves from their competitors. Option D is incorrect because in monopolistic competition, firms have some degree of market power, allowing them to charge higher prices than in perfect competition.

Monopolistic Competition Within an Industry Results In