ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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All produce exactly the same product
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All charge the same price
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All earn the same profit
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All work to differentiate their products
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Detailed explanation-1: -Monopolistic competition occurs when many companies offer products that are similar but not identical. Firms in monopolistic competition differentiate their products through pricing and marketing strategies.
Detailed explanation-2: -Product differentiation: In monopolistic competition, each firm produces goods or services that are close substitutes for the goods or services produced by other firms. Competitive firms differentiate their similar products with distinct marketing strategies, brand names, and slightly different quality levels.
Detailed explanation-3: -Vertical, horizontal, and mixed are the main types of product differentiation.
Detailed explanation-4: -Product Differentiation Under monopolistic competition, firms slightly differentiate their products. For example, tea bags rely on quality and brand name to differentiate, yet under a perfectly competitive market, they would be exactly the same.
Detailed explanation-5: -How does differentiation help monopolistically competitive firms sell their products? Differentiation enables these firms to profit from differences among products.