To maximize their profits and defend those profits from competitors, monopolistically competitive firms must
A)lobby government to erect barriers to entry in their industries.
B)limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions.
C)differentiate their products.
D)achieve economies of scale.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms differentiate their products in order to create a perceived difference in quality and attract customers. This differentiation allows them to charge a price premium and increase their profits. This strategy can also help them defend against competitors because it makes it harder for new firms to enter the market and offer identical products. Lobbying government to erect barriers to entry or limit foreign competition may also be a tactic used by monopolistically competitive firms, but these strategies are not necessary to maximize profits and are potentially illegal or unethical. Achieving economies of scale is a strategy primarily used by perfectly competitive firms or monopolies, not monopolistically competitive firms.

To Maximize Their Profits and Defend Those Profits from Competitors