ntry by new firms into a monopolistically competitive market A. leads to the same externalities that are observed when new firms enter a perfectly competitive market. B. increases the demand for existing firms' products. C. creates additional consumer surplus. D. imposes a positive externality on existing firms.

Question

Alena

Business

20 April, 01:50

ntry by new firms into a monopolistically competitive market A. leads to the same externalities that are observed when new firms enter a perfectly competitive market. B. increases the demand for existing firms' products. C. creates additional consumer surplus. D. imposes a positive externality on existing firms.

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Bree · Answer 1

C. creates additional consumer surplus.

Explanation:

Monopolistic competition is one where many forms offer products that are similar but not identical. The firms will have to highlight how their products are different form others in order to maintain competitive advantage.

When new firm s enter into the market, they will also come in with a unique product that they want to sell. This increases customer surplus as they now have a wide variety of goods to choose from.

Surplus will lead to reduction of prices of products in the market.