Asked by Anusree Nambiar on Jul 04, 2024
Verified
Monopolistically competitive firms fail to fully realize their economies of scale.
Economies of Scale
Cost efficiencies achieved by organizations through their operational scale, with per unit cost diminishing as the scale of production grows.
Monopolistically Competitive
Describes a market structure where many companies sell products that are similar but not identical, allowing for some degree of market power.
- Understand the notion of surplus capability and its consequences for firms in a monopolistic competition environment.
Verified Answer
RG
Rhiãã GëëJul 10, 2024
Final Answer :
True
Explanation :
In monopolistic competition, firms often operate at less than the output level that would minimize their long-run average total costs, thus not fully realizing their potential economies of scale due to product differentiation and the presence of many competitors.
Learning Objectives
- Understand the notion of surplus capability and its consequences for firms in a monopolistic competition environment.
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