When firms differentiate their products, they
A)provide information to consumers with no additional use of productive resources
B)always increase their profits
C)always create real differences among products
D)frequently create artificial or superficial differences among products, thus raising production costs
E)usually strain the physical capacity of their plants

Question

Quizplus · Accepted Answer

When firms differentiate their products, they may create artificial or superficial differences among products, which can raise production costs. This is because the firm may need to use additional resources to make the product appear different or to advertise the differences to consumers. Therefore, it is not always beneficial for a firm to differentiate its product, as it can also lead to increased costs.

When Firms Differentiate Their Products, They