Explain how selling costs in monopolistic competition affect the efficiency of monopolistic competition
What will be an ideal response?
The additional selling costs from product differentiation and marketing increase consumer choice by providing variety. This benefits society and weighs in favor of the efficiency of monopolistic competition. However, selling costs can add to the product's price. Also, at times the product differentiation is more apparent than real. These factors harm society and count against the efficiency of monopolistic competition.
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When a consumer spends all of his or her income and consumes a bundle of goods such that the marginal utility per dollar from all goods is equal, then the
A) consumer's total utility is maximized. B) consumer is in his or her consumption equilibrium. C) marginal utilities for each good are maximized. D) Both answers A and B are correct.
If adverse selection exists in a market,
A) it increases consumer surplus but reduces producer surplus. B) it reduces consumer and producer surplus. C) it reduces producer surplus but has no impact on consumer surplus. D) it increases both consumer and producer surplus.