Which of the following is an application of the Hoteling model of monopolistic competition?
A)Politicians tend toward positions more extreme than what they actually believe
B)Stores of similar types tend to cluster
C)Efficiency requires that stores are spread equidistant from each other in a given space
D)As space increases between firms, each firm produces less

Question

Quizplus · Accepted Answer

The Hoteling model of monopolistic competition explains why stores of similar types tend to cluster together rather than spreading out equidistantly. This is because each firm wants to be located close to its competitors in order to attract customers who are already in the area looking for similar goods or services. This creates a situation where each firm differentiates itself from its competitors in some way, such as through pricing, location, or product variety. Overall, the Hoteling model helps to explain the behavior and strategies of firms operating in monopolistically competitive markets.

Which of the Following Is an Application of the Hoteling