Monopolistic Competition Is an Inefficient Market Structure Because

question 137

Multiple Choice

Monopolistic competition is an inefficient market structure because

• A)price exceeds marginal cost.
• B)it has a deadweight loss, just as monopoly does.
• C)at the equilibrium, some consumers will value the good at more than the marginal cost of production.
• D)All of the above are correct.

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Definitions:

Price Elasticity

A measure of the sensitivity of quantity demanded or supplied to a change in price, indicating how a product's demand or supply reacts to price changes.

Income Elasticity

A measure of how much the demand for a good is affected by changes in consumers' income.

Excise Tax

A tax levied on specific goods or services, such as tobacco or gasoline, typically imposed at the manufacturing or retail level.

Consumer Surplus

The separation between the theoretical price consumers are willing to pay for a good or service and the practical price they pay.