A monopolistic competitor will advertise to:
A)reduce excess capacity.
B)increase demand for its product.
C)collude more effectively with other firms.
D)produce on the upward-sloping portion of its ATC curve.

Question

Quizplus · Accepted Answer

Monopolistic competitors differentiate their products to make them seem unique to consumers, so advertising is a way to increase demand for their specific product rather than a close substitute. This allows them to have more price-setting power and potentially earn higher profits.

A Monopolistic Competitor Will Advertise To