If a firm in a monopolistically competitive market successfully uses advertising to decrease the elasticity of demand for its product,the firm will

Question

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By decreasing the elasticity of demand, the firm has more pricing power and can therefore increase its markup over marginal cost. This allows the firm to charge a higher price than it would have been able to charge without advertising. Eventually, however, other firms may also start advertising and the market may become more competitive, leading to the need for the firm to lower its price to remain competitive in the long run.

If a Firm in a Monopolistically Competitive Market Successfully Uses