In the short run, product differentiation enables firms in monopolistically competitive markets to:

Question

Quizplus · Accepted Answer

In the short run, product differentiation in monopolistically competitive markets allows firms to have some degree of market power, similar to monopolists, because they can set prices above marginal cost due to the unique aspects of their products. This differentiates them from perfectly competitive firms, which sell standardized goods and cannot set prices. It also does not imply collusion, which is illegal and associated with oligopolies, not monopolistic competition.

In the Short Run, Product Differentiation Enables Firms in Monopolistically