Product differentiation in monopolistic competition involves a trade-off between

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Product differentiation in monopolistic competition involves offering consumers a variety of choices and unique features, which may lead to productive inefficiencies (e.g. increased costs). However, it allows firms to gain some degree of monopoly power in the short-run, due to the differentiation of their product from competitors. This ultimately provides consumers with greater choice at the expense of some productive efficiency.

Product Differentiation in Monopolistic Competition Involves a Trade-Off Between