Question

In the long-run, because of higher spending on ______________, monopolistic competition is likely to be _____ efficient than perfect price competition

a. variable costs; less
b. research, new product development and advertising; more
c. variable costs; more
d. research, new product development and advertising; less

Answer 1

I am stuck between C or D

Answer 2

'Efficiency' in economics refers to allocative and productive efficiency, and the only firm that is efficient would be the perfectly competitive market, as they produce at a socially optimal quantity. Only regulations can make monopolies or monopolistically competitive markets produce at allocative OR productive efficiency.

Therefore, b and c are wrong.

Now you must recall in monopolistically competitive markets products have differentiation. Hence, advertising and R&D is most present in these markets

Answer 3

So D is correct