Question

As customers come to believe that a firm's product is unique, this allows the firm to

a) Increase production costs
b) Charge higher prices
c) Reduce product differentiation
d) Expand market share

Answer 1

Advertising in monopolistic competition can increase demand for a firm's products by making the perceived demand curve more inelastic or shifting it to the right, allowing the firm to sell more or charge higher prices.

Step-by-step explanation:

Advertising is all about making people believe that a firm's products are different from those of its competitors. In monopolistic competition, advertising can increase demand for a firm's products in two ways: by making the perceived demand curve more inelastic or by shifting the perceived demand curve to the right. This can allow the firm to sell more quantity or charge higher prices, both of which can increase its profits.