In a monopolistically competitive market like restaurants, large capital-intensive firms like McDonaldâ€™s may co-exist with more labor-intensive mom-and-pop shops. In this case, higher labor costs would tend to favor the survival of

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Higher labor costs would favor large-scale capital-intensive firms because they rely less on labor and more on capital, making them less sensitive to increases in labor costs compared to labor-intensive small firms.

In a Monopolistically Competitive Market Like Restaurants, Large Capital-Intensive Firms