Which of the following would weaken the argument that monopolistically competitive firms should be regulated by the government?
A)Monopolistically competitive firms and perfectly competitive firms are similar in that their equilibrium prices and quantities are efficient.
B)Monopolistically competitive firms earn zero economic profits in the short run just as perfectly competitive firms do.
C)The benefits of increased product variety produced by monopolistic competition offsets the relatively small welfare costs.
D)The cost of regulating a monopolistically competitive firm could possibly be lower than the deadweight loss from monopolistic competition.

Question

Quizplus · Accepted Answer

The argument is weakened by the fact that the benefits of increased product variety, which is a characteristic of monopolistic competition, can outweigh the relatively small welfare costs, suggesting that regulation may not be necessary.

Which of the Following Would Weaken the Argument That Monopolistically