Question

in monopolistic competition, what happens when a firm begins to charge an excessive price for its product?
a consumers will boycott the product.
b consumers will choose a rival firms product instead.
c the government will regulate the price of the product.
d the company will not sell enough product and go out of business.

Explanation:

In monopolistic competition, firms offer differentiated products (close substitutes). If one firm charges an excessive price, consumers can switch to a rival's similar product (since there are many competitors with differentiated but substitutable goods). Option A: Boycotts are less likely as there are substitutes. Option C: Government regulation is rare in monopolistic competition (more for monopolies). Option D: While sales may drop, the immediate response is consumers switching to rivals, not immediate business failure. So the correct reasoning supports option B.

Answer:

B. Consumers will choose a rival firm's product instead.