A monopolistically competitive market
A)usually has too many firms, reducing the economic profit of each firm to zero.
B)usually has too few firms, reducing the product variety for consumers.
C)may have too many or too few firms, and the government can intervene to achieve the optimal number of firms.
D)may have too many or too few firms, but the government can do little to rectify the situation.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms have some market power due to product differentiation, leading to inefficiencies. The market may not have the optimal number of firms, but government intervention is often impractical or ineffective due to the complexity and dynamic nature of such markets.

A Monopolistically Competitive Market