Consumers in a monopolistically competitive market do not receive any consumer surplus because the price paid for the product exceeds the marginal cost of production.

Question

Quizplus · Accepted Answer

Consumers in a monopolistically competitive market can receive consumer surplus if the price they are willing to pay exceeds the price charged by the firm. However, because the market is monopolistically competitive, firms have some market power to charge a price above the marginal cost of production. This means that consumer surplus is likely to be smaller in a monopolistically competitive market compared to a perfectly competitive market, where price equals marginal cost and consumer surplus is maximized.

Consumers in a Monopolistically Competitive Market Do Not Receive Any