In monopolistic competition,we usually observe:
A) significant diseconomies of scale.
B) more reliance on misleading advertising than in monopoly or oligopoly.
C) slower rates of technological advance and product development due to higher advertising costs.
D) a large number of firms,each operating with excess capacity.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a large number of firms, each operating with excess capacity. This means that firms are not producing at their full potential, which leads to inefficiencies and higher costs. Additionally, there are few barriers to entry, which means that new firms can easily enter the market, making it difficult for any one firm to dominate the market. There may also be some advertising and product differentiation strategies used, but they do not rely on misleading advertising as in monopoly or oligopoly. Technological advances and product development may occur at a slower rate compared to other market structures, but this is due to the small size of firms and limited resources, rather than higher advertising costs. Diseconomies of scale are not significant in monopolistic competition, as firms are operating with excess capacity rather than reaching their maximum efficiency levels.

In Monopolistic Competition,we Usually Observe