Consumers gain from trade within a monopolistically competitive
Industry because:
A)prices fall and product varieties decrease.
B)prices rise and product varieties increase.
C)prices rise and product varieties decrease.
D)prices fall and product varieties increase.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms produce differentiated products which means they offer a variety of products to consumers. This variety of products leads to more choice for consumers. Moreover, since there is competition among firms, they try to attract customers by offering lower prices, which means prices fall or at least are not as high as they would be in a monopoly. Therefore, consumers gain from trade in a monopolistically competitive industry because they have more product varieties to choose from, and the prices are either lower than or at least not as high as they would be in a monopoly.

Consumers Gain from Trade Within a Monopolistically Competitive