Which of the following is an example of product
differentiation?
A.
I prefer Nike shoes while my friend prefers Puma shoes.
B.
Columbia sells expensive winter jackets.
C.
Adidas sells jackets while DeBeers sells diamonds.
D.
Cindy loves chocolate flavored icecream.
2.In the long run, monopolistically competitive firms are ________ to perfectly competitive firms because ________.
A.
similar; both firms produce at the minimum ATC
B.
not similar; monopolistically competitive firms set P = MC to maximize profits
C.
similar; both firms earn zero economic profit
D.
not similar; monopolistically competitive firms can earn an economic profit and perfectly competitive firms cannot
1) A
Product differentiation
In economics, product differentiation is the process of distinguishing a product or service from others, to make this product more attractive to a particular target market. It involves differentiating it from competitors' products as well as a firm's own products. Nike shoes and puma shoes can be differentiated on the basis of their quality , how comfortable they are etc.
2) C
Both perfectly competitive industry and monopolistically competitive industry have free entry and exit in the long run which leads a zero economic profit for the firms of these industries in the long run. Hence, they are similar.
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