Monopolistic competition may also be socially inefficient because there are too many or too few firms in the market. the presence of theproduct variety externality implies that there is too little entry of new firms in the market.

The appropriate response is Product variety. A promoting procedure in which a retailer stocks countless items. A wide assortment is utilized to attract clients searching for a variety of merchandise, however, does not imply that the retailer will offer a wide range of cycles of a particular item.