Product differentiation:
A) refers to the attempt of firms to make their products look like those of the other firms in the industry.
B) refers to the attempt of firms to make real or apparent differences in essentially substitutable products look different in the minds of the consumers.
C) refers to the advantage big firms have in research and development.
D) is a common characteristic of a perfectly competitive market structure.
E) is only employed in a monopoly market structure.

Question

Quizplus · Accepted Answer

Product differentiation is the process where a firm seeks to distinguish its products from those of its competitors. This can be achieved through real or apparent differences in essentially substitutable products, in order to make them look different in the minds of the consumers. This is important because it helps the firm to create a unique product image and promote customer loyalty. It is particularly relevant in monopolistic competition and oligopoly market structures.

Product Differentiation