The Economic Way of Thinking 13th Edition by David Prychitko, Peter Boettke, Paul Heyne

Exercise 4

The attempt by sellers to make their product more attractive to consumers is sometimes called product differentiation.
(a) Is product differentiation a wasteful process, imposing costs on sellers that are greater than the benefits conferred on buyers? Think of cases where it probably is wasteful in this sense, and other cases where it is not.
(b) Evaluate the following argument: "New practices initiated by sellers to differentiate their products are liable to be wasteful from the social point of view because they are liable to entail high marginal costs and low marginal benefits. But this only means that producers have already made use of the low-cost/high-benefit techniques of product differentiation; it does not show that the whole process of product differentiation is wasteful."