In the model of monopolistic competition, an increase in industry output will ________ producers of higher-priced goods and ________ producers of lower-priced goods.

Question

Quizplus · Accepted Answer

In a model of monopolistic competition, an increase in industry output typically leads to more competition and potentially lower prices overall. Producers of higher-priced goods may be harmed because their products become less attractive compared to the now more abundant, lower-priced alternatives. Conversely, producers of lower-priced goods might benefit as the increased output aligns with their competitive advantage in pricing, potentially increasing their market share.

In the Model of Monopolistic Competition, an Increase in Industry