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?
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In perfect competition firms sell a homogeneous product, price equals marginal cost (P = MC), and output is at the efficiency point (no deadweight loss). In monopolistic competition many firms sell differentiated products, face downward-sloping demand curves, and Show more…
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