Monopolistic competition-which is typical in our market-directed economy-is caused by:
A) manipulation of markets by business firms.
B) customer preferences.
C) consumers' unwillingness to pay for differentiated products.
D) business preferences.
E) None of these cause monopolistic competition.

Question

Quizplus · Accepted Answer

Monopolistic competition is caused by customer preferences for differentiated products that meet their specific needs and desires. Firms in a monopolistically competitive market use product differentiation as their primary competitive strategy to attract and retain customers. This leads to a wide range of products and brands within a market, which creates a degree of market power for individual firms.

Monopolistic Competition-Which Is Typical in Our Market-Directed Economy-Is Caused By