Question

Illustrate and explain the two distinct demand curves facing Chamberlin’s monopolistically competitive firm, and explain Chamberlin’s view of the role of advertising in monopolistic competition.

Answer 1

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According to chamberlin the advertisements leads to new market structure, they lead to increase in the sales of the given product; and thus they affect the demand curve, advertising strategies include product differentiation, and this product differentiation provides the company a monopoly over there products and thus makes pure competition impossible. This advertisement costs are included in the selling cost and not considered as factor cost

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