Firms in monopolistic competitive industries:
I. sell their products at a higher price than if their industry were strictly competitive.
II. sell their products at the same price as if they were in a monopoly market.
III. have a high incentive to innovate with new products and better quality.
A) I and II only
B) II and III only
C) I and III only
D) I, II, and III

Question

Quizplus · Accepted Answer

Firms in monopolistic competitive industries have some degree of market power, allowing them to charge a higher price than they would in a strictly competitive market (I). However, they do not have the same level of market power as a monopoly, so they cannot charge the same high price as a monopolist (II). To stay competitive and stand out from competitors, firms in this market structure have a strong incentive to innovate and improve their product offerings and quality (III).

Firms in Monopolistic Competitive Industries