In comparison to perfect competition, monopolistic competition is characterized by
A)efficient scale.
B)pricing at marginal cost.
C)excess capacity.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by excess capacity, which means that firms are not producing at their efficient scale, leading to higher average costs than necessary. This is because each firm in monopolistic competition produces a differentiated product, which gives them some market power to set prices above marginal cost. Therefore, pricing at marginal cost is not typical in monopolistic competition.

In Comparison to Perfect Competition, Monopolistic Competition Is Characterized by