A firm in monopolistic competition that introduces a new and differentiated product will temporarily have a ________ demand for its product and is able to charge a ________.
A) less elastic; a lower price than before
B) less elastic; a higher price than before
C) more elastic; a lower price than before
D) more elastic; a higher price than before
E) less elastic; the same price as before

Question

Quizplus · Accepted Answer

When a firm in monopolistic competition introduces a new and differentiated product, it creates a temporary monopoly for that product as there are no close substitutes available in the market. This results in a less elastic demand curve for the firm's product, meaning that consumers are willing to pay a higher price for the unique features or qualities of the product that are not available from other competitors. Therefore, the firm is able to charge a higher price than before.

A Firm in Monopolistic Competition That Introduces a New and Differentiated