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In: Economics

With monopolistic competition, opening to trade leads to ---- prices, ---- product variety for consumers, and...

With monopolistic competition, opening to trade leads to ---- prices, ---- product variety for consumers, and ---- firms domestically.

A higher; more; more

B lower; more; fewer

C lower; less; fewer

D lower; more; more

Solutions

Expert Solution

ANSWER : With monopolistic competition , opening to trade leads to (D) lower prices , more productive variety for consumers , and more firms domestically . Monopolistic competition is a market with free entry and exit of the firm , the product of different firm are similar but not identical , therefore there can never be a unique price but the prices will be in a group reflecting the consumers tastes and preferences for differentiates products . The demand curve of this firm is downward sloping reflecting law of demand , when new entry of the firm or open a trade , it increase the market supply so existing firm will reduced their price to sell more and attract the customer's from rival firm's so price will fall , in the same way new firm give offer at low price to attract customer's . After new entry of a firm consumer of this market get new variety of differentiates product's and number's of firm in the market increases domestically .

Rahul Sunny answered 2 years ago
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