One In the News article is titled "The Cola Wars: It's Not All Taste." Firms in a monopolistically competitive industry,such as the soft drink market,are likely to advertise in an attempt to
A)Allocate resources more efficiently.
B)Decrease the price elasticity of demand.
C)Reduce market power.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms differentiate their products through branding, packaging, and advertising. This decreases the price elasticity of demand, making consumers less likely to switch to a competitor's product even if the price increases. Therefore, the main aim of advertising in a monopolistically competitive industry is to reduce the elasticity of demand and increase market power, leading to higher profits.

One in the News Article Is Titled "The Cola Wars