Compared to pure competition,monopolistic competition:
A) provides greater product differentiation at the cost of some excess capacity.
B) offers less product differentiation but attains equal 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 provides greater product differentiation, as firms are able to create a unique brand or product that stands out from competitors. However, this also results in excess capacity, as each firm may produce a similar product with a slight variation. Pure competition, on the other hand, offers no product differentiation and does not have excess capacity, but may lead to lower profits due to the intense competition.

Compared to Pure Competition,monopolistic Competition