Once a monopolistically competitive firm innovates,it is likely that:

Question

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In a monopolistically competitive market, firms differentiate their products to capture a share of the market, and innovation can lead to further differentiation. However, this differentiation is not unique and can be easily replicated by competitors, leading to a rush of similar, highly substitutable goods. Thus, option A is the best choice. Option B is incorrect because long-run profits are not guaranteed in monopolistically competitive markets. Option C is incorrect because government protection is not typically needed in these markets.

Once a Monopolistically Competitive Firm Innovates,it Is Likely That