Firms with highly differentiated products may have loyal customers, or customers who are unable to purchase similar products or services from other firms and are therefore more likely to accept increased prices due to a firm passing on increased costs by a powerful supplier.

Question

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Firms with highly differentiated products have a competitive advantage as their customers may be loyal or may not have alternatives, making them more likely to accept price increases due to increased costs or supplier power.

Firms with Highly Differentiated Products May Have Loyal Customers, or Customers