The variety of products and product features that consumers may choose from in monopolistically competitive industries:
A) at least partially offsets the economic inefficiencies of this market structure.
B) leads to an optimal allocation of resources in the market structure.
C) guarantees that firms produce at full-capacity output levels.
D) makes the demand curves facing firms in these industries more elastic.

Question

Quizplus · Accepted Answer

The variety of products and product features that consumers may choose from in monopolistically competitive industries creates differentiated products, which allows firms to charge a slightly higher price than in perfect competition. While this may result in some economic inefficiencies, such as higher prices and less output than in perfect competition, the variety of products available does partially offset these inefficiencies.

The Variety of Products and Product Features That Consumers May