How do consumers benefit from trade among monopolistically
Competitive firms?
A)Prices are the same as in autarky, but the wider choice of goods increases consumer surplus.
B)Consumer surplus increases because prices are lower than in autarky, and there is a wider choice of goods.
C)Prices are higher than in autarky, but the wider choice of goods increases consumer surplus.
D)The government provides cash subsidies to consumers.

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms offer differentiated products to appeal to different consumer preferences. This creates competition among firms, leading to lower prices and a wider variety of goods for consumers to choose from. As a result, consumers benefit from increased consumer surplus due to lower prices and more choices. Option B accurately describes these benefits. Option A is incorrect because prices are not the same as in autarky. Option C is also incorrect because prices are not higher than in autarky. Option D is not relevant to the question as it refers to government subsidies, which are not discussed in the scenario.

How Do Consumers Benefit from Trade Among Monopolistically