Economic analysis of product differentiation leads to all of the following conclusions except one. Which is the exception?
a. Product differentiation makes it harder for firms to collude.
b. Product differentiation makes price leadership harder to maintain.
c. Product differentiation sometimes contributes to wasteful allocation of resources.
d. Product differentiation must be based on real, substantive differences among products.
e. There is a tradeoff between using resources efficiently and providing consumers with wide choices.
D
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Your upstairs neighbor is the first-chair violinist in the local symphony orchestra. Because you are very fond of violin music, you sit on your balcony each night to listen to her rehearse. In this case, your violin-playing neighbor is an example of a
A. public good. B. good that imposes an external cost. C. Pareto good. D. good that provides an external benefit.
Ronny's Pizza House operates in the perfectly competitive local pizza market. If the price of pizza cheese increases (ceteris paribus), what is the expected impact on Ronny's profit-maximizing output decision?
A) Output increases to cover the higher input cost B) Output increases because the marginal cost curve shifts upward C) Output decreases because the marginal cost curve shifts upward D) Output decreases because the price of pizza must also increase