In a monopolistically competitive market, which of the following best explains why firms can set prices above marginal cost?

In a monopolistically competitive market, firms can set prices above marginal cost because they sell products that are slightly different from each other. This means that each firm has some control over its price, unlike in perfect competition where firms are price takers. Because consumers may prefer one brand over another, firms can charge more than the cost of producing one more unit, which is called the marginal cost. For example, if a coffee shop offers a unique blend that customers love, it can charge a higher price compared to a generic coffee shop. This ability to set higher prices allows firms to earn profits, at least in the short run, as long as they maintain their unique appeal.