Product variety in monopolistic competition comes at the cost of

Question

Quizplus · Accepted Answer

Monopolistic competition involves firms producing slightly differentiated products, resulting in excess capacity as each firm has idle resources to produce a variety of products. This excess capacity leads to higher production costs, which is the cost of all the different product lines the firm is producing. Therefore, product variety comes at the cost of excess capacity.

Product Variety in Monopolistic Competition Comes at the Cost of