Economists agree that a monopolistically competitive market structure
A)lowers consumer utility because consumers pay a price higher than the marginal cost of production.
B)is detrimental to society because it leads to a waste of scarce resources.
C)benefits consumers because firms produce products that appeal to a wide range of consumer tastes.
D)can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products.

Question

Quizplus · Accepted Answer

Monopolistically competitive markets offer a variety of goods that cater to diverse consumer preferences, leading to increased consumer satisfaction. Firms differentiate their products to appeal to specific target markets, leading to better product quality and variety. This competition among firms also promotes innovation and efficiency, benefiting the overall market. While consumers may pay a higher price than marginal cost, this is due to differentiation and the costs associated with it. Monopolistically competitive markets are considered to be more efficient than monopolies and oligopolies in terms of resource allocation.

Economists Agree That a Monopolistically Competitive Market Structure