What happens as the degree of product differentiation increases among the products sold in a monopolistically competitive industry?a.The cost of production falls.b.The amount of marketing expenditures decreases for each firmc.The demand curve for each seller's product becomes more horizontald.Each seller's demand becomes more inelastic

As the degree of product differentiation increases among the products sold in a monopolistically competitive industry, each seller's demand becomes more inelastic.

Here's why:

In a monopolistically competitive industry, firms sell products that are similar but not identical. Therefore, they have some control over their prices because each firm's product is slightly different from its competitors'. This is known as product differentiation.

When the degree of product differentiation increases, it means that each firm's product is more unique compared to its competitors'. As a result, consumers may find it harder to find close substitutes for that product. This makes the demand for each seller's product more inelastic, meaning that changes in price have a smaller effect on the quantity demanded.

The other options are not necessarily true:

a. The cost of production does not necessarily fall. In fact, greater product differentiation may require more research and development, which could increase costs.

b. The amount of marketing expenditures does not necessarily decrease. Firms may need to spend more on marketing to communicate the unique features of their products.

c. The demand curve for each seller's product does not become more horizontal. A more horizontal demand curve would indicate that the product is becoming more of a commodity, which is the opposite of increasing product differentiation.