Consumers gain from trade within a monopolistically competitive industry because:
A) prices fall and product varieties decrease.
B) prices rise and product varieties increase.
C) prices rise and product varieties decrease.
D) prices fall and product varieties increase.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms differentiate their products to create a distinct identity to attract consumers. This leads to an increase in product variety. As firms compete to attract and retain customers, prices fall. Therefore, consumers gain from trade within a monopolistically competitive industry as they get to choose from a wider range of products at a lower price.

Consumers Gain from Trade Within a Monopolistically Competitive Industry Because