A. Competition in quality and service may be just as effective as price competition in giving buyers more for their money." This statement is true:
1. if producers face similar costs.
2. if consumers value quality and service more than a lower price.
3. when all firms charge a similar price.
4. when quality and price are consistent across products.
b. Monopolistically competitive firms frequently prefer nonprice competition to price competition because
1. price competition can lead to lower economic profits or even loss.
2. this results in a smaller output, a higher price, and more economic profits.
3. the decrease in demand allows the firm to raise its price with less fear of losing customers.
4. nonprice competition shifts both the demand and MC curves upward to the right.