What Characteristic of Monopolistic Competition May Help to Offset the Inefficiency

question 11

Multiple Choice

What characteristic of monopolistic competition may help to offset the inefficiency of this market structure?

• A) Free entry and exit imply that firms produce at minimum long-run average cost.
• B) Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products.
• C) Consumers may feel better about the inefficiency if they know that firms earn zero profits.
• D) Consumers may prefer this outcome to monopoly or monopsony.

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