Question

In the model of monopolistic competition, which of the following is NOT a source of gains from trade?

A

Greater variety of products for consumers

B

Specialization according to comparative advantage

C

Lower average prices for consumers

Answer 1

Comparative advantage in simple meaning is when two Nations are in trade and one nation produces any good or service at a lower opportunity cost as compared to other

It is not found in a monopolistic competition because firms not always focusses on opportunity cost reduction

In a monopolistic competition due to product differentiation in terms of shape, size, colour, quality, service etc.

There is a widely available products for the customers as well as due the competition there are lower average prices available from which consumers can select

Hence the correct answer here is option B

answered by: anonymous