Economists Have Long Debated Whether There Is a Significant Loss

question 259

Multiple Choice

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets benefit consumers despite any loss of well-being?

• A)Although consumers may pay a price greater than marginal cost for a product, the product is produced at the minimum average total cost.
• B)Although consumers may pay a price greater than marginal cost and the product is not produced at minimum average total cost, they benefit from being able to buy a differentiated product more closely suited to their tastes.
• C)Consumers pay a price equal to the marginal cost of producing a product, even though it is not produced at the minimum average total cost.
• D)Consumers are better off choosing from a variety of differentiated products, even though product differentiation causes barriers that restrict entry into monopolistically competitive markets.

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Definitions:

Balanced Die

A die engineered to ensure that each face has an equal probability of landing up when thrown.

Simple Event

An event that consists of a single outcome in the sample space of a probability experiment.

Conditional Probability

The probability of an event occurring given that another event has already occurred.

Independent Events

Two or more events in which the occurrence of one event does not affect the probability of the other events.