If firms in an industry produce differentiated products,they are likely to _____

Question

Quizplus · Accepted Answer

If firms in an industry produce differentiated products, they are likely to face downward-sloping demand curves. This means that they have some market power and can charge higher prices for their products, allowing them to earn positive economic profit in the short run. However, in the long run, new firms may enter the market or existing firms may expand their production, leading to increased competition and reducing the economic profit to zero.

If Firms in an Industry Produce Differentiated Products,they Are Likely