Question

Monopolistically competitive firms are troublesome to regulate for all of the following reasons, EXCEPT:_________.

a. they comprise a large proportion of the economy.
b. their market and political power renders them virtually untouchable.
c. it could result in fewer choices for consumers.
d. regulating prices only magnifies the inefficiency typical of these firms.
e. the government may be forced to subsidize firms to keep them in business.

Answer 1

Answer: b. their market and political power renders them virtually untouchable.

Step-by-step explanation:

Monopolistically competitive firms typically comprise a large proportion of the economy and are therefore troublesome to regulate due to their sheer number.

Regulating them could also be troublesome for the economy as it might reduce the options that consumers have as well as exacerbate the inefficiencies of said firms.

They are not however, virtually untouchable as there are a myriad of laws that enable the Government to regulate them if the Government feels it is in the best interest of the consumers.