Product innovation and development is efficient if the marginal social cost of a new and improved product ________ its marginal social benefit. In monopolistic competition marginal revenue is less than price, so product innovation is probably ________ to its efficient level.

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Product innovation and development is efficient when the marginal social cost equals the marginal social benefit. In monopolistic competition, firms have some market power, leading to less incentive to innovate, so innovation is not pushed to its efficient level.

Product Innovation and Development Is Efficient If the Marginal Social