Question

Give reason or explain:

Selling cost is incurred by a firm in Monopolistic competition.

Answer 1

The products sold under monopolistic competition are differentiated from each other. The products of the monopolistic firm is differentiated on the basis of certain characteristics as colour, shape size, etc. Such product differentiation further leads to selling costs by the firms. Through such expenses as advertisement, a particular monopolistic firm tries to convince the consumers by distinguishing its product on qualitative basis from its substitutes and thereby, attract greater number of customers to it.