The administrative burden of regulating price in a monopolistically competitive market is
A)small due to economies of scale.
B)large because price is usually below marginal cost.
C)large because of the large number of firms that produce differentiated products.
D)small because firms produce with excess capacity.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms produce differentiated products, which means that there is a large number of firms and a diverse range of products. Regulating the prices of such a large number of firms and products can be a daunting task, thus creating a large administrative burden. The other choices are not relevant to the situation.

The Administrative Burden of Regulating Price in a Monopolistically Competitive