In a Monopolistically Competitive Market with Dixit-Stiglitz Preferences, the Number

question 4

True/False

In a monopolistically competitive market with Dixit-Stiglitz preferences, the number of firms in the differentiated product market falls as goods in that market become less substitutable.

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Definitions:

Excess Capacity Problem

A situation where a firm has more production capacity than needed to meet demand, leading to inefficient use of resources.

Monopolistic Competition

An economic setup in which several companies offer products that are closely related but not exactly the same, granting them a certain level of influence over the market.

Nash Equilibrium

The situation that occurs in some simultaneous games wherein every player is playing his or her dominant strategy at the same time and thus no player has any reason to change behavior.

First-Mover Advantage

In game theory, the benefit obtained by the party that moves first in a sequential game. A situation that occurs in a sequential game if the player who gets to move first has an advantage in terms of final outcomes over the player(s) who move subsequently.