In monopolistic competition, price exceeds marginal cost because there is an under-allocation of resources at the level of output that maximizes profits. The appropriate reaction to the question is choice (d).
When several producers compete with one another while selling different products that are not precise alternatives for one another, the situation is known as monopolistic competition.
Every producer produces differentiated goods in monopolistic competition. The goods are comparable but not identical. They are close counterparts rather than perfect ones. In addition to other differences, they differ from one another in terms of design, color, flavor, and packing.
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