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With the growth of the internet, there is a large number of online retailers as well as buyers in the online retail market.
a) Why, given the growth of the Internet, would you expect to find that different firms would charge very similar prices for the same good?
b) Despite the logic of part a of this question, several recent studies have found that different online retailers often charge quite different prices. How might you explain this result?
c) Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market?
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