The variety of products and features that consumers may choose from in monopolistically competitive industries
A) at least partially offsets the economic inefficiencies of this market structure.
B) leads to an optimal allocation of resources in the market structure.
C) guarantees that firms produce at full-capacity output levels.
D) makes the demand curves facing firms in these industries perfectly elastic.

Question

Quizplus · Accepted Answer

Monopolistically competitive industries have differentiated products and features, which provide consumers with a wider range of choices. This variety of products and features partly offsets the economic inefficiencies of such market structures, such as higher prices due to advertising and marketing costs. Therefore, choice A is the correct answer. Choices B, C, and D are incorrect because they are not supported by the characteristics of monopolistic competition.

The Variety of Products and Features That Consumers May Choose