Question

The following statements regard product differentiation in monopolistic competition. Label the following statements as being either true or false. Each label may be used more than once.1. Product differentiation can include small physical changes to the product, physical location of where the product is sold, and perceptions about the product brought about by advertising. 2. Monopolistic competition through the use of product differentiation promotes productive and allocative efficiency automatically since the market forces are at work. 3. One of the problems of product differentiation is that the price of differentiated products is higher than they would normally be.

Answer 1

Answer:

1. true

2. false

3. true

Explanation:

A monopolistic competition is when there are many firms selling differentiated products in an industry. A monopoly has characteristics of both a monopoly and a perfect competition. the demand curve is downward sloping. it sets the price for its goods and services.

An example of monopolistic competition are restaurants

In a monopolistic competition, price is higher than marginal costs, so the market cannot be productively efficient. Also, price is higher than marginal cost, so monopolistic competition cannot be allocative efficient.