Question

Sort the following outcomes of product differentiation by whether they are costs or benefits of monopolistic competition.

Answer 1

Answer:

Costs are:

• 5. A long-run production at a point tangent to the average total cost (ATC) curve.
• 1. The prices set above the marginal costs of production.

Benefits are :

• 4. The competition based on location
• 2. The increased variety
• 3. The competition based on quality

Explanation:

• The outcomes of the product differentiation whether they are the costs of they are the cost or benefits of the monopolistic competition which is a type of the imperfect competition where the many products sells the products that are different from one another and thus have no perfect substitutes, the costs are found in the long-run production to the average total costs and those that are set above the marginal costs.

• The cost that is based on the benefits is the competitive based on location, ad the increase of the variety and on the competitive based quality of the products.