5 Are advertising and brand names efficient? To the extent that advertising and brand names provide consumers with information about the precise nature of product differences and product quality, they benefit the consumer and enable a better product choice to be made.

But the opportunity cost of the additional information must be weighed against the gain to the consumer.

The final verdict on the efficiency of monopolistic competition is ambiguous. In some cases, the gains from extra product variety unquestionably offset the selling costs and the extra cost arising from excess capacity. The tremendous varieties of books and magazines, clothing, food and drinks are examples of such gains. It is less easy to see the gains from being able to buy a brand-name drug that has a chemical composition identical to that of a generic alternative. But many people do willingly pay more for the brand-name alternative.