The Product-Variety Externality Arises in Monopolistically Competitive Markets Because

question 244

Multiple Choice

The product-variety externality arises in monopolistically competitive markets because

• A)firms produce with excess capacity.
• B)firms try to differentiate their products.
• C)firms would like to produce homogeneous products, but the large number of firms prohibits it.
• D)entry and exit is restricted.

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Definitions:

Marginal Cost Curve

A graphical representation showing how the cost of producing one additional unit of a good changes as production volume changes.

Total Fixed Costs

Expenses that do not change with the level of output or sales, such as rent, salaries, and insurance premiums.

Area Under

Refers to the space beneath the curve of a graph in mathematics and statistics, often used to calculate integrals.

Average Cost

The total cost of production divided by the total quantity produced, indicating the cost per unit of output.