Economics · Monopolistic Competition
Which factor causes long-run excess capacity and allows firms to operate under suboptimal production scales in monopolistically competitive markets compared to perfect competition?
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Heterogeneity of products
- 2Excess capacity caused by product differentiation and downward-sloping demand curve✓
- 3Non-price competition
- 4Selling cost
Correct answer
Excess capacity caused by product differentiation and downward-sloping demand curve
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