Compared to pure competition, monopolistic competition
A) provides greater product differentiation at the cost of lower productive efficiency.
B) offers less product differentiation but attains a higher productive efficiency.
C) provides greater product differentiation and achieves greater productive efficiency.
D) offers less product differentiation and lower productive efficiency.

Question

Quizplus · Accepted Answer

Monopolistic competition allows firms to differentiate their products, giving them some market power, but this comes at the cost of lower productive efficiency compared to pure competition where all firms produce identical products.

Compared to Pure Competition, Monopolistic Competition