Monopolistic competition in an industry results in:

Question

Quizplus · Accepted Answer

Monopolistic competition in an industry results in chronic excess capacity because each firm is producing differentiated products, creating a small degree of market power. This makes it difficult for firms to fully utilize their plants or achieve economies of scale, leading to excess capacity. Option A is incorrect because overutilization of plants happens when firms try to produce more than their capacity, which is not the case in monopolistic competition. Option C is incorrect because firms in monopolistic competition often use extensive advertising to differentiate their products from competitors. Option D is incorrect because firms in monopolistic competition have some market power, so they can charge higher prices than in perfect competition.

Monopolistic Competition in an Industry Results In