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Suppose the market for donuts is initially monopolistically competitive. Then a law is passed that requires all donuts shops to be the same and to
Suppose the market for donuts is initially monopolistically competitive. Then a law is passed that requires all donuts shops to be the same and to sell identical products. There are still many donut shop owners, but their services and products are identical. a. Why would we expect some "excess capacity" in the original monopolistically competitive market? b. Would consumers be better off under the new market structure? What would consumers lose and what would they gain by switching to the new system? Would the donut shop owners be better off
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